Appendix 3

Proposal to Assist

The Provisional Government of Somaliland

To Attain Effective and Democratic Governance

Table of Contents

Prepared by:

Ministry of Finance

Somaliland

Hargeisa

January 1992¹⁰²

1 Introduction

The civil war ended in the north of the former Democratic Republic of Somalia at the end of January 1991.  After reconciliation among the different clans and professional groups within this region, the citizens agreed in May of 1991 by democratic methods to form Somaliland on the territory of the former British Somaliland.

The infrastructure of Somaliland was nearly completely shattered during the civil war.  Over 70% of all buildings were destroyed, all capabilities for generating and distributing electricity were destroyed, nearly all telecommunications facilities were destroyed, most supplies of water were disrupted, and approximately 1.5 million active land mines were left, particularly in and around villages and cities as well as along rural roads.  Between 5% to 10% of the people were killed, many more suffered permanent injuries and over 50% of the population is still displaced, either internally or as refugees abroad.

There is practically no tax base left for the Government to collect significant revenues.  Other governments around the world have delayed recognizing Somaliland, primarily for reasons that have nothing to do with the government itself.  Therefore, the Government has received practically no foreign assistance during the first year after the war, other than immediate humanitarian aid.

In this situation, the central Government has been surviving with total revenues of about $130,000 per month on an average.  With about 800 officials and employees, this gives an average per official of about $162.50 per month for salaries and other operating expenses (including Ministers).  Although this government has many very-highly qualified officials, it is unable to function effectively as a government with such a ridiculously-low budget.  It is also unable to attract other talented Somali citizens to work for the Government on the urgent tasks of reconstruction.  It also has no funds left over for financing the reconstruction of its infrastructure and reflating its economy.  This government could potentially create many interesting plans, but it lacks the funds to begin the implementation of any of these plans.  It doesn't have the funds to pay employees to collect and analyze reliable data as the basis for serious planning activities.

Although the Government has practically no debts, internally or externally, it can not borrow money on international markets as long as governments withhold recognition.  As long as it has no funds available, it can not afford to conduct public relations activities to inform the rest of the world on what is going on in its country or to conduct an effective diplomatic effort to quickly achieve official recognition.

Within the framework of this new democratic government with a new free-market economy, but no external assistance, the citizens have already shown amazing innovative strength in repairing many buildings and reconstructing the micro-components in the private sector of their shattered infrastructure.  However, they can not reconstruct the larger components in the public sector of their shattered infrastructure without foreign assistance.

Due to the lack of funds alone, the Government is not able to perform the normal functions of acquiring data, developing plans, and coordinating activities for meeting the immediate humanitarian needs of its people.  Therefore, the many NGO's working in the territory of the Republic on humanitarian problems simply bypass the Government, which in itself weakens the Government, and they do not coordinate their activities adequately among each other.  Many of the ad hoc and uncontrolled activities of these NGO's for solving short-term problems, from their perspective, are causing serious long-term damages for the Republic.  Therefore, it is urgently necessary to provide this Government with the bare minimum of financial support so that it can effectively plan, coordinate, and manage the activities within its territory concerning humanitarian aid.

The citizens of Somaliland made a number of important policy decisions and the Government has been implementing these policy decisions to the best of its limited ability.  It is urgently necessary to provide a minimal level of support so that these important policy decisions can have a fair chance of success.  Following is a brief list of the current policies and processes that need to be strengthened quickly.

As one simple example, Somali experts are working on a new Constitution< in preparation for free elections.  However, this important work has been slowed since no funds are available to obtain the technical assistance of international experts on constitutional law.  It is not feasible to simply copy an effective constitution from another country, if only because the social nature of the local society requires creative solutions for providing effective democratic procedures that are easy to implement in other societies.

As one other simple example, the main currency in circulation within Somaliland is the Somali Shilling of the former socialist dictatorship.  The Government and Central Bank that issued and backed this currency no longer exist.  Under the former dictatorship, this currency experienced sharp inflation.  Today, it is experiencing sharp deflation in Somaliland, only because the old paper bills are wearing out and being lost -- so that the supply of money in circulation is decreasing while the economy is slowly recovering.  There are billions of freshly-printed but unissued paper bills stored for Mogadishu in another country.  These paper bills could be released into the economy at any time, which could cause unimaginable disruptions to the local economy of Somaliland.

The new Republics of Slovenia and Croatia had funds available to design and print new currencies one and one-half years before they actually needed them.  But Somaliland still does not have the funds needed to design and print a new currency of its own.  The Government has had some preliminary discussions with Giesecke & Devrient in Munich as well as with Thomas de la Rue in Great Britain concerning a new currency, but has not been able to place a first order.

Somaliland quickly consolidated the militias of the various liberation movements on its territory into a national military force.  At the same time, it quickly demobilized this force down to about 40,000 men by the summer of 1991.  The Government has had plans for continuing demobilization down to about 10,000 men since then, but has been blocked in achieving this goal by the lack of funds to do so.  Rapid demobilization after a war of liberation is a complex process, particularly when the economy is shattered so that there are no economic opportunities for demobilized soldiers.  Therefore, it requires adequate funding in order to be successful.

In the first more-or-less ad hoc demobilization, many middle-level officers left the military to resume their civilian professions, often leaving units of soldiers with no contact or chain-of-command with the rest of the military.  This problem is complex, due to the destruction of virtually all telecommunications and postal capabilities for internal communications, even within the military.  The Government has no funds to pay any salaries to any of its military personnel, other than occasional handouts of food.  This is a potentially dangerous and destabilizing situation, with several thousand teen-age soldiers, still armed with semi-automatic weapons, but with no contact with superiors or any income.  This was the cause of fighting that occurred in Burao in January 1992.  It was reported incorrectly as fighting among different clans, but was actually several cases of hungry soldiers using their weapons to obtain food.  We expect that this problem will continue to worsen and threaten the new democracy as long as the Government does not have adequate funds to defuse this dangerous situation.

The Government urgently needs cash for the following actions:

This project is focused upon strengthening the democratic government of Somaliland.  The primary goals of the government to the project include:

1. strengthening the ability of the government to function effectively,

2. speeding and strengthening the implementation of current political and economic reform (including the transitions to democracy, decentralized government, and a free-market economy),

3. supporting a systematic approach to strategic planning,

4. supporting an increased level of regional cooperation in the Horn of Africa, and

5. supporting an increased level of international cooperation.

This project is divided into the following sub-projects for the purpose of achieving these goals:

1 a Human-Resources Utilization Package,

2 an Infrastructure Package,

3 demobilizing 75% of the military forces to consolidate domestic tranquility, and

4 creating a National Data-Collection Center (NDCC).

Economic revival and political tranquility have already begun to return to Somaliland.  An effective government machinery is an inseparable component to the confirmation of this revival and tranquility  In fact, an effective administration is a pre-condition to the success of all other sectors of government which include political, social and economic activities.  This project will enhance in Somaliland the success of the current and future:

2 Sub-Project 1:  Human-Resources Utilization

This sub-project proposal is focused upon strengthening the new democratic Government of Somaliland through the effective utilization of its skilled human resources.  It emphasizes the need for assisting the Government to operate effectively as a decentralized government with a free-market economy.  These particular activities exclude funding or activities for the actual reconstruction of the shattered infrastructure or reflation of the economy -- which must still be planned by the Government, with the direct support of this project.

The Government of Somaliland is organized as a decentralized democracy at the following levels:

The Provisional Central Government currently has only 800 civil service employees, but should expand to about 2800 employees.  The Regional Government should expand from 550 to about 1800 civil servants and the Municipalities should also expand from 800 to about 3000 civil servants within 6 months.  The total will be about 7,600 employees.

The fundamental problem is that the Government of Somaliland immediately needs a much-larger budget of cash than its current revenues -- to meet its operational needs.  Due to its almost non-existent tax base, it will not be able to raise more than approximately 15% of its normal operational requirements as taxes.  It is estimated that it will take at least 3 years before its tax base will increase substantially to maintain expenses.  Normally, it would be possible for the Government to simply borrow sufficient funds to operate reasonably for the next year.  However, because it is not yet recognized, it can not borrow the money on international markets that it needs immediately.

This proposal defines a recommended budget supplement for the next two 6-month periods in order to enable the Government to function reasonably effectively for this short period of time.  The first 6-month period is a transitional period of scaling its operations up to normal levels and the second 6-month period is a more stable period that will probably repeat into following 6-month periods with only small changes.  This supplement, as well as parts of the other components of this proposal, will play an important role in reflating the local economy.  Therefore, this in effect should substantially increase the tax base of the Government.  At the end of this 6-month period, it will be necessary to evaluate the results and to define an appropriate budget for the following 6-month period, that takes the experience from the first 6-month period into account.

We can start by estimating salary requirements for a civil-service staff as follows:

1.1  Salaries for the members and staff of the Constituent Assembly

There are 140 legislators and senior advisors who require an average salary of $550/month.  This implies a requirement for $77,000/month and $462,000 for each 6-month period.

There are also 50 employees who require an average salary of $350/month.  This implies a requirement for $17,500/month and $105,000 for each 6-month period.

1.2  Salaries for the Supreme Court and Regional Courts

<M>There are approximately 100 judges and senior staff members, who require an average salary of $550/month.  This implies a requirement for $55,000/month and $330,000 for each 6-month period.

1.3  Salaries for Staff of the Provisional Central Government (PCG)

The Provisional Government of Somaliland (PCG) will be expanding its staff from about 800 to 2800 civil servants over the next six months.  We recommend budgeting an average salary of $450/month for these civil servants, as follows:

The preliminary estimate for the following 6 months will assume no further increases in personnel, i.e. 2800 civil servants x $450/month x 6 months = $7,560,000

1.4  Salaries for the Regional Governments

The Regional Governments will be expanding their staffs from about 550 to about 1800 civil servants over the next six months.  We recommend budgeting an average salary of $350/month for these civil servants, as follows:

 The preliminary estimate for the following 6 months will assume no further increases in personnel, i.e., 1800 civil servants x $350/month x 6 months = $3,780,000.

1.5  Municipality Salaries

The Municipalities will be expanding their staffs from about 800 to about 3000 civil servants over the next six months.  We recommend budgeting an average salary of $300/month for these civil servants, as follows:

The preliminary estimate for the following 6 months will assume no future increases in personnel, i.e. 3000 civil servants x $300/month x 6 months = $5,400,000.

1.6  Reserve for Miscellaneous Operating Expenses

We do not yet have sufficient data to estimate other operating expenses, such as travel expenses, etc.  Therefore, we simply propose budgeting an extra 25% of the total estimated expense for salaries each month for these other operating expenses.

Total Budget Supplement for First 6 Months

Following is a summary of our preliminary estimates for an appropriate budget supplement for the first six transitional months:

Following is a breakdown by months for the first six months:

Total Budget Supplement for the second 6 Months

Following is a consolidation of our preliminary estimates for an appropriate budget for the second 6 months, after the six-month transitional period:

1.7  Transition to Democracy

There is an urgent need to carry out many steps toward the practice of democratic procedures.  Voter registration for all eligible voters to facilitate fair and free elections in Somaliland in 1993 is crucial for a smooth transition to democracy.  It is estimated that half of the 4 million population of Somaliland will be eligible to vote.  The estimated cost of registration and conducting elections and necessary procedures will be approximately $3 per person.  This gives a total of 2,000,00 x $3 = $6,000,000.

Total for Human Resources Utilization package is as follows:

3 Sub-Project 2:  Infrastructure

We have defined an infrastructure package here as one large package with various components for the first six-month period and a smaller package for the second six-month period.

2.1  Buildings

Despite two decades of neglect, there still remains some building and office space available to all levels of the Government in nearly all locations except for Hargeisa, which has suffered a destruction of approximately 90% or more of all buildings.  The Central Government, which is located primarily in Hargeisa, as well as both the Regional Government and the Municipal Government of Hargeisa suffer from a lack of adequate building and office space to function properly.  Therefore, this one-time infrastructure package will focus upon creating:

for all 3 levels of government in Hargeisa.  (The US Government is providing funding for a project to restore the supply of water in Hargeisa.)  In addition, it will be necessary to renovate government-owned houses in order to provide adequate housing of Government officials and employees.  Minor renovations of housing and office space in major cities are also included.

Our current estimates, for this sub-project, are as follows:

It is important to note that these costs are all for partially repairing the damages to the infrastructure that previously existed, but was destroyed by the former socialist dictatorship which misused foreign aid for this purpose.  It will always be difficult to determine how much new foreign aid will be appropriate to compensate for the damages caused by the foreign aid to the former dictatorship over the past decade.  The costs for partial reconstruction proposed above correspond to compensation for about 0.2% of the total damages caused by foreign aid to the dictatorship in Hargeisa alone.  (This city had a population of about 300,000 when it was destroyed and one could estimate the total value of this destruction at about $3.33 or $4 billion, i.e. about $13,333 per resident.)

Concerning office space, the Government has only partially renovated a few buildings within one complex with an area of about 4 square kilometers.  As an example, only one of these buildings has functional toilet facilities.  There are other partially-damaged and unused buildings within the same complex that could be used if they were renovated.  There is an acute shortage of office space now and the number of personnel is increasing rapidly.  Therefore, we propose the construction of adequate office space, to include completing the renovation of partially-renovated buildings.

Concerning government-owned houses, the Government needs to provide housing for many of its employees and already owns houses for this purpose that must be renovated before they can be used.  Due to the approximately 90% destruction of all buildings in Hargeisa, the few usable building left that are available for rent command very-high rents, typically at least $667 per month.  Cabinet Minister are currently sharing rooms, and sleeping on cots.  Therefore, it is appropriate to quickly re-install roofs, doors, windows, electrical wiring, toilet facilities, etc. in a reasonable number of government-owned houses as quickly as possible.

Concerning electricity, the Government is currently using small portable generators.  However, it appears to be more practical and efficient to restore the Hargeisa electrical-power station than to continue adding more small portable power generators.

Concerning telephones, most of the offices of the Central Government are located within an area of about 4 square kilometers and 25 buildings within this area.  For locations outside of this area, it appears to be more cost-effective to temporarily use "mobile" telephone technology to establish trunk connections between fixed private exchanges -- rather than to install cabling at this time.  This "mobile" telephone equipment will be usable later, when it is replaced by city cabling in this first application, for spreading telephone capabilities to rural areas.  This is a limited approach in order to provide reasonable telephone communication within the 3 levels of Government within Hargeisa and does not yet include telecommunication connection to other cities or the outside world -- which must be added later under a more-comprehensive concept for reconstruction of telecommunications capabilities.

The 35% fee for local and home-office expenses includes not only the overhead cost of operating these offices, but also the management costs and costs for negotiating and controlling the various subcontracts, acquiring equipment, etc.

We can only give a very-general estimate of $3,500,500 at this time for building in the second six-month period.

2.2  Central Motor Pool

The most cost-effective approach for providing the Government with adequate local-transportation capabilities consists of creating a central motor pool.  This motor pool will support the transportation requirements of the central Government (including Ministries, the Supreme Court, and the Parliament), the Regional Government, and the Municipalities.

The Central Government already owns a maintenance building in Hargeisa which can be used for central maintenance functions.  The costs for making this building operational and operating it for 6 months are estimated as follows:  

The current estimate of the need for vehicles during the next six months includes:

for a total of 195 vehicles.  Assuming an average acquisition cost, including delivery, of $40,000 per vehicle, this will require a budge of approximately $7,800,000 for acquisition alone.  It would be desirable to use a single supplier of vehicles if possible, in order to reduce the costs of maintenance, spare parts, and training.

Following are our estimates for reasonable costs to acquire and operate a motor pool for 6 months:

As a very general estimate at this time, we estimate a budget requirement of approximately $2,000,000 for the second six-month period, which will include the acquisition of some additional vehicles.

2.3  Furniture, Equipment, and Supplies

Approximately 7,600 civil servants at all 3 levels of Government need some kind of office furniture.  We estimate an average cost per civil servant at $533; therefore, we estimate a budget requirement for the first six months of 7,600 x $533 = $4,050,800.

For the second six-month period, we estimate a continued requirement for $533,500 of furniture.

The Government will also need conference rooms.  At the national level, there is a minimum need for

This gives a total of 32 conference rooms for the national level.  Adding 20 for the regional level and 15 for the municipal level gives a total minimum requirement for 67 conference rooms.

We propose to equip each conference rooms as follows:  

The white board will be produced locally, using either plywood or sheet metal and a white enamel paint.  Sheet metal would have the advantage that it can also be used as a magnetic board.

We estimate the requirement for supplies (flip-chart paper, paper-marker pens, white-board marker pens, overhead-foil pens, replacement bulbs for projectors, etc. at $333 per six-month period per conference room.  This generates a budget requirement for 67 x $333 = $22,311 for each six-month period.

It will be possible to use the standard US keyboard layout.  We estimate the need for approximately 2,000 typewriters at an average cost of $400 each.  This generates a total cost of $800,000 for the first six-month period.  We estimate a replacement and maintenance cost of 10% = $80,000 for the second six-month period.  We estimate the costs for materials and supplies, particularly different kinds of paper, at $133 per typewriter in each six-month period  This will amount to 2,000 x $133 = $266,000.

The Government does not own any computers or computer equipment at this time.  However, many of the officials and civil servants of the Government have prior training and experience in the use of computers -- particularly IBM-compatible personal computers.  Some of these people own their own personal computers, but lack of public electricity makes the use of such individual computers difficult at this time.

We recommend using computers for secretaries who type most of the working day.  Modern word processing with inexpensive personal computers greatly increases the productivity of such personnel.

Since most such personnel will be typing in more than one language, the availability for computer software for checking the spelling and grammar can be very useful for improving the quality of this multi-lingual word processing.  We have software available for multi-lingual word processing using mixtures of the Latin, Arabic, and Amharic alphabets within one document  This require the use of a laser printer or equivalent to handle the different alphabets.  The use of word processing eases the exchange of text data and encourages continued use of text files with desk-top publishing to obtain high-quality documentation for government projects.

Initially, we propose using only two different computer configurations.  The reason is to simplify the problems of maintenance, spare parts, and training.  The larger systems will be configured for desk-top publishing and/or data-base applications.  The medium-sized systems will be configured primarily for multi-lingual word processing.  The medium-size systems are configured for use with MS-WINDOWS, in order to provide a standard user-interface for all users whenever possible.  Later, it may be appropriate to link many of these computers together in local-area networks.  However, initially it will be sufficient to exchange data on floppy diskettes.

It will be necessary to revise these configurations at the time when funding is available, due to the rapid changes on this market.  We hope to be able to obtain special discounts for the software, that we can not estimate before we are in a position to actually request offers from suppliers.

For the central level of government, we have estimated a need for 600 medium-sized systems.  We estimate a need for 150 systems at the regional level and 200 systems at the municipal level.  The total estimated number of medium-sized systems is 950.  We also estimate a need for 20 of the more-powerful systems for all levels of government.

The medium-level systems are currently configured as follows:  

The more-powerful computer systems are configured as follows:  

We estimate the operating costs as $533 per system for six months.  This covers primarily laser cartridges and paper, as well as some floppy diskettes.  This gives an estimated cost of 970 x $533 = $517,010 per six-month period.

For the second six-month period, we estimate a need for purchases of $466,700.

Most of the computer systems will serve several civil servants, often using dictating machines for communication between end users and secretaries.  For this purpose, we propose using 950 desk-top dictating machines for secretaries at a cost of about $133 each.  The cost will be about 950 x $133 = $125,350.  We also propose using 2,000 portable hand-held dictating machines at a cost of about $67 each for the persons dictating.  This cost will be about 2,000 x $67 = $134,000.  The total of these two amounts, for the first six-month period is $260,350.  For the second six-month period, we estimate a requirement for supplies, consisting mainly of dictating tapes, at $13 per desk-top system.  This cost will be about 950 x $13 = $12,600 per six-month period.

The Government now has only 2 or 3 photocopy machines.  As the Government expands and increases its productivity per civil servant, we estimate that it will need approximately 1 photocopy machine for very 10 typewriters or computer systems.  Therefore, we estimate a need for about 300 photocopy machines at an average cost of about $2,000 each.  Some will be faster machines with more options for magnification and demagnification and some will be slower and simpler machines.  Therefore, some will cost much more than $2000 each but most will cost less than $2,000 each.  The total cost for this acquisition will be about 300 x $2,000 = $600,000 for the first six-month period.  We estimate a continued need for additional equipment and replacements at 10% of this cost for the second six-month period, i.e. at $60,000.  We also estimate an average requirement of $800 per photocopy machine for supplies, primarily cartridges and paper, for each six-month period.  This will amount to 300 x $800 = $240,000.

The Government will need to have different types of official stationary printed.  This can be done in Djibouti for an estimated cost of about $113,500.

As a very-preliminary estimate, without having performed a detailed calculation of the weights and volume involved or even knowing the original shipping points, we estimate shipping costs at $133,500 for the first six-month period and at $13,500 for the second six-month period.

Because of the over simplifications of these preliminary estimates, we recommend including reserves for additional miscellaneous items in the amounts of $800,000 for the first six-month period and $267,000 for the second six-month period.  This will include office supplies, such as staplers, punches, binders, folders, overhead foils, pencils, erasers, etc.

We also estimate the need for a fee of 35% for local and home-office expenses, to bear part of the responsibility and costs for guarantees as well as installation and implementing introductory training.  Normally, computer dealers apply a mark-up of at least 60% for such overhead costs.  This fee will also include the overhead costs for maintaining a local offices, with spare parts and supplies, as well as capabilities for providing reasonable maintenance service.

The various supplies and equipment provided in this sub-project should be issued and accounted for by the newly-created GCS (Government Central Stores).

Budget for First Six Months for Furniture, Equipment, and Supplies

Budget for Second Six Months for Furniture, Equipment, and Supplies

The total budget for the package is as follows:

4 Sub-Project 3:  Demobilization and Domestic Tranquility

The government of Somaliland wants to demobilize approximately 75% of its current security forces, from about 40,000 military personnel to about 10,000 police and security personnel, within six months.  The government hopes to be able to demobilize