Outlook for 2011-12

The imminent addition of 4,000 extra troops to the African Union Mission in Somalia (Amisom) should tilt the balance of power towards the forces loyal to the transitional federal government (TFG) and away from the main Islamist insurgent group, al-Shabab, at least around the capital, Mogadishu. However, the rebels are likely to keep control over most of the country's territory. The lack of clarity about what will happen once the mandate of the TFG expires in August 2011 poses severe risks to political stability. Credible national elections are unlikely to be held in the forecast period. The humanitarian situation is set to remain dire, given recent drought and the Islamists' refusal to allow foreign aid agencies to operate in the areas that they control.

The political scene

In the past quarter the Federal Transitional Parliament and the TFG unilaterally extended their own mandates by three years and one year, respectively. In March the prime minister, Mohamed Abdullahi Mohamed Farmajo, demanded that all UN agencies working on Somalia should relocate from Kenya to Mogadishu. Three Amisom soldiers have been convicted of causing civilian deaths by their actions, which the peacekeeping force has presented as proof that it does not act with impunity. The governments of Uganda and Burundi have announced that they will each send an extra 2,000 troops to join Amisom, lifting the mission's total number of peacekeepers to 12,000.

Economic policy and the domestic economy

A recent report has highlighted the dire humanitarian situation in Somalia, claiming that nearly one-half of the people in some rural areas are in acute food and livelihood crisis or humanitarian emergency. Nationally, the report estimated that in early April 2011 one in every seven children under five years old was acutely malnourished and one in every 25 severely malnourished

The Somaliland Republic

In April an unknown assailant threw a grenade into a marketplace in the regional capital, Hargeisa, wounding 20 people. Although the authorities blamed a mentally ill man for the attack-thereby implying that it was a one-off with no political or sectarian motivation-the incident was a stark reminder of how fragile the peace in Somaliland can be. In February the UK government announced that it would sharply increase its aid to Somaliland to around £32m (US$52m) in 2013/14. The Somaliland government has announced that it expects nearly to double its annual revenue to US$100m in 2011-a rise driven mainly by better tax collection. However, the parallel decision to slash tax rates will make this objective difficult to achieve.

Land area

637,600 sq km

Population

9.1m (2009 UN mid-year estimate)

Main towns

Population (2009 World Gazetteer estimates)

Mogadishu (capital): 1.6m

Hargeisa: 436,232

Bossasso: 108,016

Gaalka'yo: 85,252

Berbera: 71,151

Borama: 68,851

Kismayu: 66,921

Laascaanood: 40,579

Garoe: 38,636

Climate

Hot and dry

Weather in Mogadishu (altitude 12 metres)

Hottest month, April, 26-32°C; coldest months, July and August, 23-28°C; driest months, January and February, 1 mm average rainfall; wettest month, June, 97 mm average rainfall

Languages

Somali; also Arabic, Italian (in the south) and English (in the north)

Measures

Metric system

Currency

Somali shilling (SoSh); the self-styled Somaliland Republic has its own currency, the Somaliland shilling (SolSh)

Time

3 hours ahead of GMT

Public holidays

January 1st (New Year's Day), Id al-Fitr, Id al-Adha, Ashura, May 1st (Labour Day), June 26th (Independence Day), July 1st (Foundation of the Republic); all Islamic holidays are observed in accordance with the lunar calendar; this may mean that the following dates are approximate: Mawlid al-Nabi (the birthday of the Prophet, February 15th); Eid al-Fitr (end of Ramadan, August 30th); Eid al-Adha (Feast of the Sacrifice, November 6th); Islamic New Year (November 26th)

Official name

Somali Democratic Republic

Form of state

In theory, a unitary republic, but a new constitution, due for approval in 2011, is set to create a federal republic; in May 1991 the Somali National Movement (SNM) unilaterally declared the creation of an independent state in the north, the Somaliland Republic; the rest of the country remains divided between rival armed factions

Legal system

In April 2009 parliament passed a bill for sharia (Islamic law) to be applied throughout the country; however, in practice, local authorities or elders enforce laws based on custom

National legislature

The People's Assembly has not been active since 1991; a new, interim, 550-seat Federal Transitional Parliament (FTP) was expanded in January 2009 from 275 seats to incorporate the Islamist opposition Alliance for the Re-Liberation of Somalia (ARS) group based in Djibouti and members of civil society; the new FTP, based in Mogadishu, is also made up of representatives from Somalia's four major clans (each has been allocated 61 seats), while a fifth grouping (an alliance of minority clans) has 31 seats;

National elections

Last elections in 1967 (presidential) and 1969 (legislative); credible national elections are unlikely to take place in 2011-12, owing to the continued grave insecurity and the lack of government control in the country

National government

The president, prime minister and 36-member cabinet; the cabinet was re-formed in February 2009; Sheikh Sharif Sheikh Ahmed is president of the interim Transitional Federal Government (TFG) of Somalia; it is unclear what will replace the TFG when its mandate expires in August 2011, despite its recent unilateral extension of its term by one year; Ahmed Mohamed Mohamoud Silanyo is president of the Somaliland Republic

Main political factions

The main political factions that make up the FTP are the Alliance for the Re-Liberation of Somalia (formerly based in Djibouti), the National Salvation Council (NSC), the Somali Restoration and Reconciliation Council (SRRC), various regional administrations, and various civil society and traditional leaders; al-Shabab (the biggest insurgent jihadi group, which has recently incorporated another Islamist militia, Hizbul Islam); Alliance for the Re-Liberation of Somalia (ARS; based in Eritrea);

President: Sheikh Sharif Sheikh Ahmed

Prime minister: Mohamed Abdullahi Mohamed Farmajo

Key ministers

Defence: Abdihakim Mohamed Haji Fiqi

Finance & Treasury: Hussain Abdi Halane

Foreign affairs: Mohamed Abdullahi Omar

Internal affairs & security: Abdishakur Sheikh Hasan Farah

Minerals, energy & petroleum: Abdirizaq Sheikh Muhiddin

Ports & transport: Ahmad Abdirahman

Somaliland Republic

The Somaliland Republic in the north was declared independent in 1991, with Hargeisa as its administrative capital; it has functioning legislative and executive branches of government; in the long-delayed presidential election, finally held in June 2010, the incumbent, Dahir Riyale Kahin, came second; the winner was Ahmed Mohamed Mohamoud Silanyo, who was the candidate of the Kulmiye ("unifier") party; Mr Kahin leads the Democratic United National Party (UDUB), while the province's other party, the Justice and Welfare Party (UCID), is led by Faisal Ali Warabe, who came third in the presidential poll; parliamentary and council elections are due to be held by the end of 2011

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The imminent addition of 4,000 extra Ugandan and Burundian troops to the African Union Mission in Somalia (Amisom) is likely to tilt the balance of power towards the forces loyal to the transitional federal government (TFG) and away from the main Islamist insurgent group, al-Shabab, at least around the capital, Mogadishu. However, the rebels are likely to hold on to most of the territory that they currently hold, which comprises over half the country, without a further increase in Amisom's numbers and firepower.

The lack of clarity about what will happen once the mandate of the TFG expires in August 2011 poses severe risks to political stability. The government's recent unilateral declaration of a one-year extension to its term is unlikely to receive the constitutionally required approval of the Federal Transitional Parliament (FTP), the speaker of which, Sharif Hasan Shaykh Adan, remains implacably opposed to the TFG's president, Sheikh Sharif Sheikh Ahmed. The TFG appears unwilling to revoke its self-granted extension, which could lead to a political stalemate that robs the country's dysfunctional transitional institutions of what little legitimacy they have. On balance, the Economist Intelligence Unit expects a face-saving compromise to be reached. The current transitional government will probably be reshuffled after August 2011, including the election of a new leader by the FTP (although this could prove to be a sticking point).

Foreign governments will continue to support the security forces loyal to the interim administration by providing money, training and materials. However, donors look set increasingly to adopt a "two-track" approach, engaging with both the TFG and any regional administrations deemed to be competent. If the transitional institutions in the capital, Mogadishu, are unable to improve their functioning and end in-fighting, this process will result in their increasing marginalisation by foreign powers. However, the TFG will resist this trend and will brandish the threat of Mogadishu falling entirely under Islamist control if donors cut off support. Thus, we expect donors to overcome their misgivings about the transitional institutions in order to avoid their total collapse.

Compounding an already dire security situation, the failure of the deyr rainy season (September-December), upon which most Somalis depend for farming and pastoralism, is set to increase food insecurity from already alarmingly high levels. The Islamists' refusal to allow foreign humanitarian agencies to operate in their territory will condemn many thousands to hunger. The number of internally displaced people is therefore set to increase, particularly in Mogadishu, where many pastoralists will flee in search of food, despite the high security risks.

Acts of piracy by Somalis off the Horn of Africa, including the hijacking of ships and the kidnapping of their crews for ransom, are likely to remain frequent throughout the forecast period, given the expected continuation of instability onshore. The greater focus of US policy towards Somalia on the semi-autonomous region of Puntland will mean more donor-backed efforts towards the development of viable alternative livelihoods for those currently engaged in piracy. However, a well-equipped and organised hard core will remain unwilling to forgo such a lucrative racket in favour of legitimate occupations such as fishing.

A new constitution was originally due to be finalised in the first half of 2011, but the end of the year now looks to be the earliest possible date for this. The other task that is critical to the successful completion of the transitional period is the holding of national elections. However, given the government's limited areas of control in Mogadishu and central and southern regions, credible polls are highly unlikely to be held in the forecast period. Although the draft constitution provides for a federal government, future electoral boundaries have not been set, and the question is likely to prove deeply controversial, not least because of the secessionist ambitions of Somaliland and Puntland. In any event, voting in Somalia will remain firmly along clan lines, and any future federal government will have to include adequate representation of the main clans to ensure political and social stability.

The lack of a lasting political settlement and continued civil conflict mean that negligible progress towards economic normalisation is likely in 2011-12. The failure of the 2010 deyr rainy season in most parts of the country means that the humanitarian situation will deteriorate further, pushing the number of Somalis dependent on humanitarian emergency assistance over the 2m mark. Moreover, drought in key pastoral regions has reduced the quality and size of goat herds, which will lead to rising local prices for food and lower livestock export receipts. Because of continuing insecurity, large-scale theft by contractors, distributors and armed groups, and the refusal of al-Shabab to tolerate foreign humanitarian agencies, the supply of aid will remain extremely difficult.

Remittances from the Somali diaspora are forecast to increase in 2011-12 from already high levels of around US$1bn a year, in line with global economic growth and improvements in money transfer technology, which should alleviate hardship in recipient households to a limited extent. Increased development assistance from the US will start to materialise in Puntland. The region will also benefit from recent oil exploration agreements, although uncertainty over the regional government's authority to strike such deals will continue to deter all but the most intrepid investors.

The Somaliland government's main objective will remain the formal recognition of the region as a sovereign state by the international community. Recognition of South Sudan's independence may help this cause in the medium term. The orderly handover of the presidency to Ahmed Mohamed Mohamoud Silanyo in July, one of the few peaceful transfers of power from an incumbent to an opposition candidate in Africa's post-independence history, will boost the province's claim to independence. However, most foreign governments will continue to support the beleaguered TFG, which opposes Somaliland's full secession, as would any likely successor to the TFG. Moreover, the African Union's position is clear: Somalia should remain a single state.

Thus, in the forecast period the government will have to content itself with increasing de facto recognition in the form of aid inflows. However, the expected rise in international assistance carries risks. Politically, an increase in aid could upset the delicate balance of power between a weak central authority and local chiefs. Meanwhile, the economy could struggle to absorb large injections of foreign funds without this fuelling inflation and undermining local entrepreneurship. Bright spots in the region's economic outlook include the Kuwaiti-sponsored renovation of the airports at Berbera and Hargeisa, and the large investment by a French-owned firm, Bolloré Africa Logistics, in Berbera port, which will continue to be the government's main source of revenue throughout the forecast period.

As was expected-with some trepidation-by international donors, the Federal Transitional Parliament (FTP) extended its own mandate by three years in February. The unilateral extension by the FTP was sharply criticised by donors, including the EU and US, for further destabilising an already failing nation-building process. The speaker of the FTP, Sharif Hasan Shaykh Adan, has defended the move as being supported by the vast majority of the parliament's 550 members. However, this is hardly surprising, as the extension of the parliament means they will continue to draw generous salaries and enjoy opportunities for patronage. The FTP has been an ineffectual talking-shop to date, with precious little to show for the money spent propping it up. Indeed, it has not passed a single law in its six years of existence.

The Transitional Federal Government (TFG) rejected the FTP's declaration of a three-year extension as illegitimate. However, the president, Sheikh Sharif Sheikh Ahmed, is powerless to stop it. (There have long been tensions between Mr Adan and Mr Ahmed, who compete for dominance over the feeble transitional institutions.) However, despite this condemnation of the FTP's extension and earlier pledges to hold a presidential election once the TFG's mandate expires in August this year, the transitional administration promptly announced an one-year extension of its own mandate.

This move also displeased the TFG's exasperated donors and other interested foreign powers. Unsurprisingly, Mr Adan and the FTP have reciprocally denounced the prolongation of the TFG's mandate as illegal. The UN has pointed out that, under the Federal Transitional Charter, the TFG needs the approval of the legislature to extend its mandate. However, this does not mean that the transitional government will back down. How the standoff will play out when the TFG's original mandate ends in August is difficult to determine. On balance, the Economist Intelligence Unit expects a face-saving compromise to be reached. The current TFG may accept being reshuffled after August 2011, including some changes of leadership by the FTP. Although plausible, this scenario is by no means a certainty. Mr Ahmed has disappointed his Western backers, as he has largely failed to increase popular support for the TFG through strategic alliances with other Somali groups. As a result, there is certainly appetite among international donors for replacing Mr Ahmed, but whether this can be accomplished without even greater turmoil is unclear.

Although the idea that elections could be held any time soon in war-torn Somalia was always unrealistic, the unilateral approach of the two institutions and total disregard for donors' concerns will exert further strain on already difficult relations. In January the TFG indicated that it was in no hurry to finalise a new constitution, doubling the size of the Independent Constitutional Commission (ICC) and embarking on lengthy consultations with a broad range of Somali stakeholders (February 2011, The political scene). Although an extension of the TFG's mandate would be unconstitutional, it could at least buy some time for the ICC to complete its task.

Donors may be unhappy about the situation, but if they were to cut off aid to the transitional institutions, their total collapse would follow rapidly. Without donor funds, there would be no means to pay the TFG troops, many of whom would probably defect with their weapons to the Islamist militia they are currently fighting or to local warlords. Given this unappetising prospect, interested foreign powers are likely to maintain their aid commitments, letting the status quo limp on amid meagre efforts to change the situation. This was demonstrated by the TFG's refusal to participate in a conference to be held by the UN in the Kenyan capital, Nairobi, in mid-April. Despite the government's boycott, the special representative for Somalia, Augustine Mahiga, has declared that the event will go ahead, even though it is largely aimed at finding ways to improve relations between the FTP and the TFG. The conference will bring together many of the same representatives of Somali factions that have participated in previous fruitless conferences, so we expect little of substance to result from this one, whether or not the government participates.

In an attempt to flex the TFG's political muscle, the prime minister, Mohamed Abdullahi Mohamed Farmajo, announced in late March that all of the UN agencies working on Somalia should relocate from Nairobi, where they are currently based, to the Somali capital, Mogadishu. The prime minister made the reasonable argument that staff working on Somalia would understand the situation in the country better if based there. This suggestion has been dismissed before as impractical, given the huge security risks in the city. However, Mr Farmajo has cited the recent gains made in Mogadishu by TFG troops and the African Union Mission in Somalia (Amisom) as proof that the security situation has improved enough to relocate UN staff there.

The announcement is likely to irritate the UN and other international agencies that continue to regard the Somali capital as too unsafe for permanent expatriate staff. It also highlights the gap between how the TFG is portraying its strength and how it is viewed from the outside. The regime is entirely dependent on Amisom for its survival and still only controls parts of Mogadishu, while the main Islamist insurgent group, al-Shabab, controls the majority of the south and centre of the country. Ultimately, there is little the TFG can do if the UN agencies refuse to relocate.

Mr Farmajo's demand may have been partly motivated by growing discussion among international donors of a "two-track approach". This entails foreign governments and agencies engaging with both the TFG and any regional administrations that demonstrate they are able to secure their jurisdictions. The US first announced its intention to adopt a two-track approach in late 2010, citing the administrations in Somaliland and Puntland as likely development partners. This move is motivated primarily by a desire to establish bulwarks against the spread of al-Shabab in the country and elsewhere in the region, but other donors are now considering the approach in broader terms.

A recent report by a Belgian-based security think-tank, International Crisis Group, Somalia: The Transitional Government on Life Support, was highly critical of the TFG and called on the UN and other donors to begin supporting and engaging with local administrations directly in light of its ineffectiveness. The transitional government is thus probably concerned that it will become increasingly marginalised by donors, as it controls only part of the capital, has little political support, is paralysed by in-fighting and has failed to deliver anything of substance to date.

Somalis have long complained of Amisom's lack of accountability, blaming the mission for numerous deaths in the capital as a result of the shelling of civilian areas. For its part, Amisom has long blamed al-Shabab fighters for this loss of life, accusing them of using civilians as human shields by launching attacks from residential neighbourhoods and marketplaces. However, in November 2010 and January 2011 Amisom arrested three of its own soldiers for shooting civilians in Mogadishu. The three Ugandan soldiers were tried by a military court in the city, but have been sent back to Uganda to serve two-year sentences in a military prison. The force's commander, Major-General Nathan Mugisha of Uganda, has apologised for the civilian deaths and pointed to the convictions as proof that Amisom does not operate with impunity.

The peacekeepers are in a very difficult position, lacking both popular legitimacy and an effective political partner in the TFG. Amisom's refusal to employ Somalis at its base in Mogadishu on security grounds has further alienated locals. The reliance of the peacekeeping force on foreign staff and imported goods minimises the economic benefits of its presence in the country. Amisom's recent attempts to demonstrate accountability could go some way towards changing locals' feelings about the mission, but this stance will need to be maintained and the mission's concern for civilian casualties raised to win and keep popular support.

The governments of Uganda and Burundi have announced that they will each send an extra 2,000 troops to join Amisom, lifting the mission's total number of peacekeepers to 12,000. Other countries such as Ghana, Guinea, South Africa and Nigeria had pledged to contribute troops to Amisom, but have so far shown few signs of honouring this commitment. The international community will therefore welcome the boost to Amisom's numbers, which could tip the balance of power decisively against the Islamists, at least in Mogadishu.

However, the fact that the mission is comprised exclusively of Ugandan and Burundian troops risks undermining its legitimacy. Its narrow composition makes Amisom appear more like an occupying force in the eyes of ordinary Somalis-whose long experience of military interventions in the country has made them hostile towards foreign soldiers-rather than a multilateral peacekeeping mission. Uganda has already paid a heavy price for contributing the majority of Amisom's troops: al-Shabab murdered 74 people in bomb attacks in the country's capital, Kampala, in July 2010. Sending more Ugandan troops will do little to counter popular impressions, strengthened by Islamist propaganda, that Uganda is acting as an occupier rather than liberator.

A multi-donor-funded humanitarian agency, Food Security and Nutrition Analysis Unit-Somalia (FSNAU), has provided alarming details of Somalia's humanitarian situation in a recent report. It estimates that there are 1.5m internally displaced persons (IDPs) in Somalia, out of a total population of around just 9m. Of these, 910,000 are identified as a "group in crisis" by the FSNAU. There are IDPs present in both rural and urban areas, and the displacement of such a large group of people also increases the risk of conflict as local groups compete for scarce resources. It is estimated that around 60% of the IDPs originate from Mogadishu.

The insecurity in the southern and central parts of the country is a major constraint on the delivery of humanitarian assistance, especially as the main Islamist insurgent group, al-Shabab (which controls the majority of these regions), has banned humanitarian agencies from operating there. At present the FSNAU estimates that 41% of agro-pastoralists are in acute food and livelihood crisis (AFLC) or humanitarian emergency (HE), as are 43% of pastoralists and 11% of those living in riverine areas. Broken down by region, the combined effects of drought and conflict are clear, as 57% of the population in the south and 30% in the central regions is considered to be in AFLC or HE, compared with just 7% in the north-east (mainly Puntland) and 6% in the North West (mainly Somaliland). Nationally, the agency estimated that in early April 2011 one in every seven children under five years of age was acutely malnourished, and one in every 25 severely malnourished-a 7% rise on six months earlier. The regional disparities are again pronounced, with around three-quarters of malnourished children being located in the south of the country.

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In April an unknown assailant threw a grenade into a marketplace in the regional capital, Hargeisa, wounding 20 people. Although the authorities blamed a man with mental illness for the attack-thereby implying that it was a one-off with no political or sectarian motivation-the incident was a stark reminder of how fragile the peace in Somaliland can be. Similarly, in November 2010, the government blamed a family dispute for a grenade attack in the capital. Although these incidents do appear to have been apolitical and have not been claimed by any of the belligerents in Somalia's civil war, there have been politically motivated attacks. These include the murders of development workers and a suicide bombing in 2008, which targeted the Ethiopian consulate and offices of the UN Development Programme and resulted in 25 deaths.

Somaliland has long been a beacon of social and political stability in an otherwise war-torn country. However, concerns persist that Somaliland might become a target for groups such as the biggest Islamist insurgent group, al-Shabab, not only because of its aspirations to independence, but also for the government's ties to Ethiopia and the West. The risk of Somaliland becoming a target for jihadi and Somali nationalist groups will rise as Western donors engage more with the local administration.

Nonetheless, given the breakaway region's dependence on aid, the government clearly thinks this is a risk worth taking. For example, in February the UK government announced that aid to Somalia would triple from £26m (US$42m) in fiscal year 2010/11 (April-March) to £80m in 2013/14, of which around 40% would be allocated to Somaliland. Recent US policy shifts also indicate that it intends to boost its support for Somaliland. Similarly, in March delegations from both France and Denmark visited Hargeisa to discuss aid and co-operation with the region. Although increasing foreign aid is obviously welcomed by the regional authorities, there is a risk that, unless handled sensitively, it could upset the balance of power between a weak regional administration and local clan leaders. Also, donors will need to be mindful of the government's ability to manage extra aid flows, as well as the ability of the local economy to absorb it effectively.

The Somaliland government has announced that it expects to nearly double its annual revenue to US$100m in 2011-a rise driven mainly by better tax collection. To this end the Ministry of Finance announced that it will target Somaliland's 40 biggest businesses and richest individuals to ensure their tax compliance. The government estimates that it is forgoing nearly US$25m in revenue a year from just the country's largest mobile-phone provider, Telesom, through laxity.

However, to sweeten the pill for the region's businesses, the government has slashed tax rates in the 2011 budget-a decision that will make it harder to achieve its target of doubling receipts. Payroll and sales taxes were cut from 12% to 5% and income tax cut to 10% from a high of 25%. The government's efforts to double its receipts will be further hindered by the lack of rain that has hit livestock production in some parts of Somaliland, which is likely to reduce receipts from livestock exports through Berbera port.

The capacity of the government to improve tax collection on its own is limited, but donors are set to help. For example, the World Bank is training tax collectors, while the US government is funding the construction of tax-collection offices. Overall, it is unlikely that any donors will provide direct support to the government, preferring to allocate aid to specific projects in areas such as school building, water infrastructure and emergency humanitarian assistance. In any event, boosting fiscal revenue significantly will be necessary to fund the recent doubling of civil servants' salaries (February 2011, The Somaliland Republic).