Somalia’s two-year (2014-15) Economic Recovery Plan (ERP) provides a roadmap for Somalia’s transition from emergency relief to economic recovery by placing among its priorities rapid upgrading of state capacity and rapid rehabilitation of infrastructure (including ports) as well as financial sector regulation and supervision. With regard to the private sector, the government’s vision focuses on the enabling business environment by providing basic infrastructure and effective regulation. The project supports the ERP and the implementation approach is closely aligned with initiatives to strengthen governance in the Central Bank of Somalia (CBS) and the procurement systems under the Financial Governance Program.
Component 1: Strengthening CORE Economic Institutions
Strengthen the economic institutions in three critical areas of the economy: (i) central banking, to allow for the emergence of a formal financial sector, which would improve access to finance; (ii) the Ministries of Commerce and Industry, to support the introduction of a basic and more modern legal and regulatory framework that would reduce transaction costs for entrepreneurs; and (iii) local port and customs authorities, to leverage private capital, networks and expertise to improve performance of the port sector.
• Strengthen Central Bank supervision and regulation
• Improve the business environment by reducing the time and cost of starting and operating a formal business
• Develop the port sector in Mogadishu, Kismayo, Marka and possibly Bossaso
Component 2: Expanding Economic Opportunities
Provide direct support to the private sector—through technical assistance and grants—to expand economic opportunities in the country.
• Support the recovery of the private sector by providing matching grants to support small and medium-sized enterprises (SME).
• Promote the development of SMEs through direct and indirect capacity building support.
Component 3: Project Management
Institutional support for project implementation and supervision.
Since early 2014, the bank accounts of the majority of Somali (commercial) remittance providers in the UK, US and Australia (and to a lesser extent in Scandinavia) have been closed. This is part of the broader global “de-risking” discussion. The particular context of Somalia – with a lack of a formalized financial sector and a quantifiable terrorist threat – intensifies the risk situation and affects the decisions taken by financial institutions. Given the critical importance of remittances to Somalia, the Somali government, remittance providers and civil society have called for a public sector-led response. Remittance flows continue to reach Somalia, with limited impact to date on the magnitude and cost of remittances, as private sector players have been resourceful in finding alternatives. The overall situation however remains fragile.
The World Bank will contribute to medium-term regulatory and supervisory capacity building efforts in Somalia. The activities will support the Federal Government of Somalia to establish a plan to support the flow of remittances to Somalia. This project will be closely coordinated with the longer-term World Bank project, the Somali Core Economic Institutions and Opportunities Program (SCORE), already endorsed by the SDRF Steering Committee. These activities will also be complementary to the actions being undertaken by other donors.Component 1: Drafting of Money Transfer Business (MTB) Regulations
In order to facilitate the immediate strengthening of the regulatory framework for the MTB sector, the World Bank will work with the CBS to draft and enact MTO Operating Regulations that are based on the draft AML/CFT Bill, to which the World Bank has already provided technical assistance. The regulations are to include provisions for customer due diligence, recordkeeping, ongoing monitoring, reporting, internal controls, consumer protection, and risk management. They will apply to all registered and licensed MTBs operating in Somalia. The WB will also work with the CBS to draft and enact MTB Customer Registration Regulations, which will apply to customers of all MTBs to ensure a level playing field.Component 2: Placement of Trusted Agent
As longer-term capacity building initiatives are put in place through the Bank’s SCORE program, the SRFS Project will initiate efforts in the short term by embedding an external firm to work alongside the CBS to begin on-site and off-site supervision: the “Trusted Agent”. The Trusted Agent will also build capacity at the CBS to ultimately transfer this responsibility back to the authorities. The Trusted Agent will administer on behalf of (and in coordination with) the CBS on-site and off-site supervision to ensure that the MTOs and their agents comply with the regulations mentioned above and meet the requirements on an on-going basis. The Trusted Agent will carry out ongoing training of CBS staff. The World Bank will undertake the procurement of the Trusted Agent.
Somalia’s perceived petroleum potential holds potential for revenue streams that could contribute to the inclusive economic development of the country. A recent assessment requested by the Federal Government of Somalia re-confirmed that addressing the political challenges of petroleum development is a prerequisite to peace and security and that the international community can play a facilitating role. This project responds to a direct request made by the Minister of Petroleum and Mineral Resources (MPMR) for programmatic support for the petroleum sector.
Supporting Connectivity for the Higher Education Sector Program
The Federal Ministry of Posts and Telecommunications acts as the implementing agency supporting connectivity to the higher education sector, supporting Somalia’s Research and Education Network (SomaliREN). The World Bank also working with the UbuntuNet Alliance, through the AfricaConnect Initiative, to support connectivity for the higher education sector in Somalia beyond the REN system.
The main objective behind the EU AfricaConnect initiative is to engage in a conditional financing scheme laying the internet backbone for the continent’s regional Research and Education Networks (RENs), enabling connection points to member National Research and Education Networks (NRENs) to connect to the regional REN, and linking regional RENs to the global REN community via connections to the European research and education backbone network global Research and Education network, GÉANT.
The UbuntuNet Regional Network is the regional research and education Internet backbone network in Eastern and Southern Africa that connects Southern and Eastern African NRENs to each other and to the global REN network via GÉANT. The UbuntuNet Alliance is the organization that manages and operates the UbuntuNet backbone network and is the responsible party that will provide all technical, financial, and infrastructural support to Somalia as a member NREN under the AfricaConnect Initiative.
Somalia’s REN, SomaliREN, has notionally been a member of the UbuntuNet Alliance since 2009, but has hitherto been unable to provide its 20% share of the conditional financing (€280,000) required for linking the NREN with UbuntuNet regional backbone network.
SIM registration policies have swept rapidly across the African continent with implementation motivations stemming in large part from a practical interest in improving security environments. The benefits of SIM registration have been under emphasized and under-utilized by many governments so far. The World Bank and the Government of Somalia are discussing the benefit of the policy for Somalia, the development of the relevant knowledge and governance capacity in both public and private sectors, to implement SIM card registration.