GUIDEBOOK INVESTMENT & FINANCING IN SOMALIA A Practical Guide to Partnering and Cooperation for Finnish and Somali Companies 2019 GUIDEBOOK INVESTMENT & FINANCING IN SOMALIA A Practical Guide to Partnering and Cooperation for Finnish and Somali Companies 2019 Finnpartnership / Manketti Ltd. / EuroAfrica Consulting and Services Ltd. Printed: 2019 Authors: Janne Sykkö, Yusuf M. Mubarak, Abdirisak Adam Front Cover Photos: Stuart Price / AU-UN IST PHOTO; Janne Sykkö; AMISOM Charts and Tables: Manketti Ltd. and different sources Design and Layout: Maria Nurminen ISBN (hakemus käsittelyssä) (nid.) ISBN (hakemus käsittelyssä) (PDF) PREAMBLE This financial guide will serve Finnish and Somali companies aiming to make business partnerships, projects and investments in Somalia’s market. The guide provides selected information about the main financing organisations in Somalia. In addition, it provides information about both international and local institutions interested in investing and/or supporting investments in Somalia. Somalia is recovering from instability and wars. The country holds a lot of business potential for investments, and it has been making substantial economic growth and positive progress in the recent years. From the point of view of financial markets and business operations, challenges to security and instability are greatly reducing, although several challenges still exist. As a fragile state, Somalia is in a process of renewing and reformulating its financial, monetary, taxation and company laws. Also, there remain some challenges for companies related to the monetary transactions. This is because Somalia is not yet well connected to international financial institutions and banks. However, Somalia is making close cooperation with the IMF and the World Bank, as a part of the process to pardon the country’s debt. Once Somalia receives a positive response, it will be much easier for the country to get loans and investments for its major infrastructure and reconstruction projects. In the next few years to come, Somalia will need to renew its energy production and distribution network, to rebuild its transport network, manage its water and land resources, expand its housing stock, make education sector reforms, address illegal fishing, invest in fishing, agriculture and livestock economy and so on. Indeed, as the country goes forward and retools its economic engines, demand for factors and production technologies will increase and will need strategies and huge investments. Major countries and institutions supporting Somalia to recover include but are not limited to Finland, Sweden, Denmark, Norway, USA, UK, China, Italy, Germany, Turkey, Middle Eastern Countries as well as the Word Bank Group, the African Development Bank and the Islamic Development Bank Group. The authors of this guidebook highly appreciate contributions from all the individuals and persons from the different financing institutions and other organisations in Somalia and Finland for sharing their valuable time and knowledge in order to make this guidebook. The authors recognise that this guidebook is not comprehensive but its purpose is to give a brief overview of the main business principles, development cooperation and private financing environment in Somalia to facilitate Somalian and Finnish business partnerships. Finnpartership programme, funded by the Ministry for Foreign Affairs of Finland, has funded the publication of this guidebook. 5 CONTENTS 1 RELATIONS BETWEEN SOMALIA AND FINLAND 8 1.1 Business Collaboration 9 1.2 Trade Statistics 10 2 BUSINESS IN SOMALIA 11 2.1 Trade and Foreign Direct Investments 11 2.1.1 Somalia’s Exports 12 2.1.2 Somalia’s Imports 12 2.1.3 Foreign Direct Investment to Somalia 13 2.2 Setting up Business in Somalia 13 2.3 Business Related Observations 14 2.4 Investment Opportunities 15 2.5 Development Cooperation Overview 16 2.6 Sustainable Development Goals 16 2.7 National Development Plan of Somalia 17 3 FINNISH FINANCING INSTRUMENTS 18 3.1 Finnpartnership 18 3.2 Finnfund 20 3.3 Business Finland 21 3.4 FCA Investments Ltd 22 4 MULTILATERAL FUNDING ORGANISATIONS 23 4.1 European Union 23 4.1.1 EU Trade 23 4.1.2 EU Delegation and Development Cooperation 24 4.1.3 European Investment Bank 25 4.2 World Bank 27 4.3 African Development Bank 28 4.4 Islamic Development Bank 29 4.5 United Nations 30 4.5.1 UNOPS 31 5 OTHER NORDIC COUNTRIES 32 5.1 Sweden 32 5.2 Norway 32 5.3 Denmark 33 6 6 LOCAL BANKS AND FINANCING 34 6.1 Local Banks 35 6.1.1 Amal Bank 35 6.1.2 Premier Bank 36 6.1.3 International Bank of Somalia (IBS) 37 6.1.4 Salaama Bank 38 6.1.5 Dahabshiil Bank 39 6.2 Other Financing Organisations 40 6.2.1 Kaah International Microfinance Services (KIMS) 40 6.2.2 Shuraako 42 7 BUSINESS CULTURE AND CUSTOMS IN SOMALIA 43 _____ ANNEX 1. Useful links 45 ANNEX 2. References 46 ANNEX 3. Map of Somalia (United Nations) 47 ANNEX 4. Map of Finland (Nations Online Project) 48 ANNEX 5. Somalia Trade Statistics 49 ANNEX 6. Development Aid by Partner, US$ Millions 50 ANNEX 7. Humanitarian Aid by Partner, US$ Millions 51 7 1 RELATIONS BETWEEN SOMALIA AND FINLAND Finland recognized the independence of Somalia on the 3rd of June 1960 and diplomatic relations between the two countries were signed in 1971. In the early years, cooperation between the countries was limited to a few expert individuals working at the UN agencies in Somalia as well as some scholarships for Somali students. The cooperation between the countries rose to a new level in the 1980s when the Finnish Red Cross started cooperation with Somali Red Crescent in the health sector. The aim of that cooperation was to strengthen the capacity and the competence of Somali Red Crescent and build a competence to intervene the serious disease of tuberculosis and in general increase the competence of several other competencies. The successful cooperation between the two in 1980s put the bilateral collaboration of the countries into a new level and ignited new projects in Somalia in several sectors. The best known one was the above-mentioned country-wide tuberculosis prevention and curing programme. Other projects implemented included supporting women’s education, building blood bank in Mogadishu near the Madina Hospital, rural community development projects in several provinces, the electrification of Baidao and Kismanyo cities and other projects aiming to build the competence of the state’s several institutions competencies. In 1982, Somalia became one of Finland’s main bilateral development partnership countries in Africa. The cooperation was focused on healthcare, food, forestry development, electrification and women’s education. Before the situation in Somalia changed into a civil war, the countries’ relations had been warm and based on mutual understanding. Due to the wars and unrest in Somalia, the diplomatic relations were re-established again on 26 February 2013, and the Ambassador was again accredited from Nairobi. During the years of instability, Finland was actively supporting Somalia’s reconciliation and humanitarian operations and programmes mainly through the UN organizations along with the other international community and countries supporting Somalia. Currently, the reconstruction and international cooperation of the two countries is based on the international New Deal for Engagement in Fragile States -agreement (2011) and the Somali compact (2013). Finland participates in the rebuilding of Somalia through political dialogue, development cooperation, crisis management, humanitarian aid and state building efforts. Today the main emphasis of the Finnish development cooperation in Somalia is still on the health sector and state building. Finnish non-governmental organisations (NGOs) are also active in Somalia. They have programmes in the fields of health sector, equality, education, freedom of speech and environmental protection. Especially the active Somali diaspora in Finland plays a vital role in the NGO projects. Several Finnish NGOs have been active in Somalia for years and they have staff and offices in Somalia. Some of these NGOs are implementing projects which could have possibilities for collaboration with Finnish companies. 8 Finland’s Country Strategy for Development Cooperation in Somalia 2017-2020. 1.1 Business Collaboration Since the 1990s, the Somalia-Finland business collaboration has mainly based on relations between individual companies and persons. At the beginning of 2018, Finnpartnership – an organization that promotes business activities and partnerships with the aim of generating positive development impacts in the target country – decided to establish a pilot project to promote partnerships between Finnish and Somalian companies. This project was named as a Somali Business Pilot Project. Before the start of the project, there were some steps taken to facilitate suitable operating environment. These included collaboration between active members of the Finnish Somali community and experts from Finnish institutions which aimed at promoting countries and companies’ business ties between 2013 and 2017. Furthermore, there were different kinds of activities and communications as well as several matchmakings and meetings between Finnish and Somali companies mostly held in Finland. This all led to the decision of Finnpartnership to hire an expert to coordinate the efforts in 2018. The outcome of the project in 2018 has led to several Finnish and Somali companies’ partnerships and collaborations as well as to a ministerial visit from Somalia to Finland in September 2018. 9 The Somalia Business Pilot Project’s main aim and purpose was to promote business relations between Finland and Somalia as well as to create foundations for partnership between Finnish and Somalian companies and encourage companies in doing business. The project also aimed to form pilot groups of companies from both the countries and support them in building sustainable business ties in a fragile state situation. Part of the project’s outcomes included but was not limited to arranging several meetings during the project period both in Finland and in Somalia, producing this guidebook and building a database for Finnish and Somalian companies to find experts for their projects.