Outlook for 2011-12

The security situation is set to remain extremely unstable in 2011-12, as forces supporting the transitional federal government (TFG) will struggle to defeat the well-armed Islamist insurgent groups that currently control most of the country. A likely increase in the number of African Union (AU) troops supporting the TFG to around 12,000 (from the current level of 8,000) may tip the balance of power against the rebels, but will probably not be enough to deal a decisive blow, at least in the outlook period. Further risks to stability stem from deep divisions within the TFG itself, its lack of popular legitimacy and uncertainty over what kind of administration will succeed it when its mandate expires in August 2011. The outlook for continued civil conflict makes the holding of credible national elections by 2012 highly unlikely. Consequently, another transitional administration is likely to be appointed once the TFG's term ends.

The political scene

On January 5th the body charged with drafting the new constitution, the Independent Constitutional Commission (ICC), was doubled in size in order to expedite its work. On October 31st a cabinet of 18 ministers, less than half the size of the previous administration, was appointed amid much acrimony. In December the two main Islamist rebel groups, al-Shabab and Hizbul Islam, merged, and the AU mission to Somalia had its mandate extended. In January the regional authorities of Puntland, a breakaway province, issued a statement declaring that they did not recognise the authority of the TFG.

Economic policy and the domestic economy

The failure of the 2010 secondary deyr rainy season (September-December) in most parts of the country has increased the risk of food insecurity to alarmingly high levels. The government has signed an agreement with a Dubai-based company, SKA Air and Logistics, to run and upgrade Mogadishu's international airport.

The Somaliland Republic

The regional authorities have announced plans to increase diplomatic efforts to secure international recognition of Somaliland as a sovereign state. On January 16th the government announced it would double the salaries of all employees in the military and the civil service. The move will be welcomed by public-sector workers, although it falls short of the 300% pay rise promised by the ruling party, Kulmiye, in its election manifesto. Furthermore, the salary increases are expected to boost inflation. A plan to renovate Egal International Airport in Hargeisa and the international airport at Berbera was agreed in December with the government of Kuwait, which will provide US$10m in funding for the projects.

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); estimated average exchange rate in 2010: SoSh1,564:US$1; the self-styled Somaliland Republic has its own currency, the Somaliland shilling (SolSh); estimated average exchange rate for the Somaliland shilling in 2008: SolSh7,240:US$1

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); new elections are scheduled for 2011, but grave insecurity and the lack of government control in the country suggest that meaningful polls cannot be held until peace is restored

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 of Somalia; 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 scale of the task facing the new prime minister of the transitional federal government (TFG), Mohamed Abdullahi Mohamed Farmajo, became clear in October, when the debate over his endorsement at the Federal Transitional Parliament (FTP) degenerated into fisticuffs. The fact that parliamentary approval for Mr Farmajo's appointment took more than two weeks, and that approval of his cabinet was a similarly drawn-out affair, indicates that the political rifts within the TFG that led to the resignation of Mr Farmajo's predecessor, Omar Abdirashid Ali Sharmarke, have not gone away. Mr Sharmarke left his post because of long-running differences with the interim president, Sheikh Sharif Sheikh Ahmed, and a similar rift is now developing between the president and the parliamentary speaker, Sharif Hasan Sheikh Aden. Such in-fighting is an important reason why many Somalis have no faith in the interim government; another is that it remains entirely dependent on foreign assistance for its survival.

Foreign governments will continue to support the security forces loyal to the interim administration by providing training and materials. However, Mr Farmajo's administration will remain heavily reliant on the small African Union Mission in Somalia (Amisom) for the remainder of its mandate, which expires in August 2011; its successor is likely to be just as dependent on Amisom, at least until 2012. Repeated calls for the strengthening of the Amisom force, which numbered 8,000 troops in mid-January, may be met by Uganda, already the biggest contributor to the force, but only if it receives help with funding, logistics and equipment. This became more likely with the UN Security Council's decision in December to authorise the expansion of the African Union (AU) force to 12,000 soldiers. A larger Amisom presence, together with a more committed national security force, could greatly expand the TFG's currently limited sphere of military influence. However, Amisom's main role of protecting the TFG has also made it a focal point for the Islamist insurgency.

Moreover, the threat from the insurgency will grow in the coming months following an agreement to merge by the two main insurgent groups, al-Shabab (Youth) and Hizbul Islam (Party of Islam). Large swathes of central and southern Somalia are expected to remain under the control of al-Shabab and Hizbul Islam in 2011-12. Compounding an already dire security situation, the recent 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 the capital, 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 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 is due to be finalised in the first half of 2011, establishing an electoral system and a federal system of government. The other task that is critical to the successful completion of the transitional period is the holding of national elections, prospects for which are slim given the government's limited areas of control in Mogadishu and central and southern regions. As the TFG's mandate expires in August 2011, another unelected transitional government, comprising representatives of the country's major clans, is likely to assume power until polls can be held. The security situation is too volatile to predict with any confidence when credible elections could be held, but even 2012 looks unlikely at present. 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 covering most of the central and southern parts of the country will translate into negligible progress towards economic normalisation in 2011-12, as the outlook for continued civil conflict will carry a heavy toll. Failure of the 2010 secondary 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. 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, but uncertainty over the regional government's authority to strike such deals will continue to deter all but the most intrepid investors.

The government elected in Somaliland in June considers that official recognition by the international community, the administration's key objective, should become more likely when the yes vote is confirmed in the referendum on independence in Southern Sudan. An end to the long-held principle that Africa's post-colonial borders should remain inviolable should in theory open the door for full de jure recognition of Somaliland's independence, a de facto reality since 1991. 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. Furthermore, secession by South Sudan may, in time, result in the new state being the first to recognise Somaliland, but this is unlikely within the forecast period. However, most foreign governments will continue supporting the beleaguered TFG, which opposes Somaliland's full secession, as would any likely successor to the TFG. Moreover, the AU's position is clear: that Somalia should remain a single state.

Unless Somaliland's sovereignty is recognised, access to international development finance will remain limited. However, the increase in aid signalled by the US in September, to counterbalance fears of growing Islamist influence in the south, will be welcome: job creation, particularly for the younger generation, and the development of a drinking-water system in Hargeisa are expected to be high priorities of this enhanced development assistance. Other bright spots in the region's economic outlook are 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.

On January 5th members of the 550-seat Federal Transitional Parliament (FTP) in the capital, Mogadishu, endorsed 15 new appointments by the government to the body charged with drafting the new constitution, the Independent Constitutional Commission (ICC), thereby doubling its size. The FTP session was attended by 285 members of parliament (MPs), 276 of whom voted in favour of the new members. Just six MPs voted against and three abstained. The vote came two days after the interim president, Sheikh Sharif Sheikh Ahmed, urged the ICC to finish its draft within 30 days because of the pressing need for a new constitution to be in place before the interim government's term in office ends, in August. The consultation draft provides for a federal state and seeks to establish the supremacy of sharia (Islamic law). However, the system of government was left as an open question in the draft, with no recommendation made as to whether the new Somali state should be presidential, parliamentary or mixed in make-up. The ICC's draft should resolve these questions.

However, Mr Sharif's new prime minister, Mohamed Abdullahi Mohamed Farmajo, appears to be working to a less pressing deadline. He told the UN Security Council on January 14th that his government had asked the ICC to expand its consultations with constitutional scholars, lawyers, religious scholars and experts in Somali culture before presenting the new constitution for parliamentary approval and thereafter to public consultation "within the next few months". Differences in opinion about the new draft constitution between Mr Sharif and Mr Farmajo's predecessor, Omar Abdirashid Ali Sharmarke, led to Mr Sharmarke's resignation in September (November 2010, The political scene). Sceptics had suggested that the president's stated preference for holding a referendum on the new constitution was a bid to drag out the process for many months, thereby allowing him to extend his term beyond August. However, the expansion of the ICC indicates that he is keen to pass the constitution quickly and to run for another term in office once it is in force. In January the UN special representative for Somalia, Augustine Mahiga, announced that there was universal backing both inside and outside Somalia for the transitional process to end in August as mandated.

The nomination of Mr Farmajo as prime minister in October took most observers by surprise, not least because of his political inexperience (November 2010, The political scene). It has also revealed continuing rifts within the transitional federal government (TFG). Endorsement of Mr Farmajo in his new position by the FTP took more than two weeks to complete, on October 31st. Delays occurred as MPs argued over how voting should be carried out after the parliamentary speaker, Sharif Hasan Sheikh Aden, attempted to conduct a secret ballot, a move condemned as unconstitutional by Mr Sharif. Relations between Mr Sharif and Mr Aden, a former finance minister in Mr Sharif's administration, deteriorated further when Mr Aden called on the UN and the African Union (AU) to intervene and help to solve the government's political differences.

Mr Farmajo announced a trimmed-down cabinet of 18 ministers-less than half the size of the previous administration-in a ceremony held at the presidential palace in Mogadishu on November 12th. However, his team was given parliamentary approval only on November 27th, after an earlier attempt to endorse the cabinet had ended in scuffles between MPs arguing about whether the vote should be secret or by a show of hands. Only two ministers from the previous government are included in Mr Farmajo's new ministerial line-up: the minister of finance, Hussain Abdi Halane, who is well regarded by the international community, retains an enlarged portfolio comprising finance and the Treasury; and Mohamed Abdi Ibrahim, the former minister for humanitarian affairs, who moves to the Ministry of Commerce and Industry. Other key appointments include:

• Abdihakim Mohamed Haji Fiqi (defence)
• Mohamed Abdullahi Omar (foreign affairs)
• Abdishakur Sheikh Hasan Farah (internal affairs and security)
• Ahmad Abdirahman (ports and transport)
• Mahmud Mohamed (federal constitution and reconciliation)
• Abdullahi Abyan Nur (justice)
• Abdiwali Mohamed (planning and international co-operation)
• Abdirashid Hashi (public works and reconstruction)
• Abdirizaq Sheikh Muhiddin (minerals, energy and petroleum)
• Abdikarin Hasan Jama (information)

Some of the difficulties in drafting an acceptable new constitution were highlighted on January 16th, when the administration in the semi-autonomous region of Puntland distanced itself from his interim government. The regional authorities issued a statement declaring that the Mogadishu administration "does not represent Puntland in international forums" and called on the UN Political Office for Somalia (UNPOS) to reconsider its position and support for the TFG "at the expense of other Somali stakeholders". The statement, which was released after a special cabinet meeting in the Puntland capital, Garoe, criticised Puntland's "lack of participation, consultation and representation" in the 2008-09 Djibouti peace process, which led to the TFG's formation, and condemned "the marginalization of Puntland from the international community's initiatives and funding intended for the reconstruction and development of Somalia as a whole". The statement welcomed the US plans announced in September to boost ties with Puntland under its "two-track policy" towards Somalia. This policy involves the US government engaging with the authorities in Puntland and Somaliland individually, while maintaining strong support for the supposedly national TFG. However, in December US State Department officials announced that the policy would be reconsidered, as many Somalis believe it to be divisive.

The two main Islamist insurgent groups, al-Shabab (Youth) and Hizbul Islam (Party of Islam), merged in the last week of December and vowed to increase attacks on forces of the African Union Mission in Somalia (Amisom), which supports the TFG. Relations between the two groups-which between them comprise several thousand fighters and control most of central and southern Somalia, as well as large areas of the capital-have been chequered in recent years. They have joined forces against troops loyal to the TFG in some parts of the country but have fought each other elsewhere.

The recent so-called merger is apparently not a union of equals, and Hizbul Islam has in effect been absorbed by the stronger of the two rebel forces. The leader of Hizbul Islam, Hassan Dahir Aweys, may therefore have decided to make a virtue of necessity by agreeing to a "merger" rather than allowing his militia to be taken over by al-Shabab-on its terms. It has been reported that under the terms of the merger Mr Aweys will lead the military campaign in central regions of the country, while al-Shabab militiamen will be responsible for operations elsewhere in the country. This includes the breakaway provinces of Puntland and Somaliland, which have to date escaped relatively unscathed from the jihadis' bloody campaign. An end to the simmering territorial disputes between the two insurgent groups will undoubtedly be to the TFG's disadvantage.

On December 22nd the UN Security Council extended the mandate of Amisom until September 30th and requested the AU to increase Amisom's strength from the current level of 8,000 troops to a maximum of 12,000. Help with the long-running problems of financing the mission came two days later, when the AU's Commissioner for Peace and Security, Ramtane Lamamra, and China's ambassador in Ethiopia, Gu Xiaojie, signed an agreement providing Chinese aid to Amisom amounting to Rmb30m (more than US$4m), which will be used to supply equipment. This was in addition to a donation by the Chinese government to Amisom of US$1.3m made through Mr Xiaojie in late November, but financing Amisom was still a serious problem in late January, when the UN Special Representative for Somalia, Augustine Mahiga, told a meeting of the Joint Security Committee of Somali officials and interested partners in Djibouti that the UN trust fund established to pay both Amisom and TFG soldiers was "at its lowest" level. This is a particularly pressing matter, as Amisom soldiers' monthly pay was increased by 37% to US$1,208 at the start of 2011 in a bid to boost morale.

Amisom only reached its original authorised strength of 8,000 troops (all from Burundi and Uganda) on December 1st, with the arrival in Mogadishu of 850 additional soldiers from Burundi. It has not been confirmed where the recently authorised extra 4,000 soldiers will come from, but these two countries are likely to supply most of them. Uganda's president, Yoweri Museveni, made a surprise visit to Mogadishu on November 28th, the first foreign head of state to set foot in the Somali capital in almost 20 years. Accompanied by a group of army officers, Mr Museveni visited Ugandan troops and met Mr Sharif and Mr Farmajo. He also visited injured civilians receiving treatment in an Amisom field hospital. The Ugandan president, who is seeking re-election in February, has made the campaign against Somalia's Islamist insurgents a priority since July, when al-Shabab murdered dozens of unarmed civilians in bombings in the Ugandan capital, Kampala.

Although Uganda's majority contribution to Amisom has been generally appreciated by the international community, the force has also attracted controversy. It has been accused by several non-governmental organisations of killing hundreds of civilians with indiscriminate shelling of residential areas in its fight against insurgents. On November 23rd two civilians died and nine were injured when Amisom troops fired into a crowd near Mogadishu airport. The force commander, Nathan Mugisha, publicly apologised over the incident. The six Amisom soldiers involved were arrested and a formal investigation launched.

Violent clashes between the insurgents and forces loyal to the TFG have continued to occur on an almost daily basis in the quarter under review. Numerous gun battles and artillery barrages in December killed at least 120 people in the capital, most of them civilians, and more than 5,000 people fled the city during the six weeks to mid-January. On January 1st at least 19 people were killed during intense fighting between al-Shabab gunmen and government forces in Hodan district in south Mogadishu, and heavy shelling of the area in and around the capital's main Bakara market, in the centre of the capital, on January 17th killed more than 10 people. Overall, 2010 was the bloodiest year in a decade for Mogadishu, according to a global humanitarian agency, the International Red Cross (IRC). The IRC treated more than 6,000 people for war-related injuries in its clinics in 2010, up from 5,000 in 2009 and 2,800 in 2008.

The humanitarian situation in Somalia is expected to deteriorate further in the coming months following failure of the 2010 secondary deyr rainy season (September-December) in most parts of the country, according to the Famine Early Warning Systems Network (Fewsnet) of the US Agency for International Development. The disappointing deyr season has been attributed to a global weather phenomenon known as La Niña. The number of Somalis depending on humanitarian emergency assistance has risen by 20%, from 2m-around one-third of the total population, a number that represented an improvement in 2010 after two good rainy seasons-to 2.4m in the second half of 2010. Poor deyr rains have worsened pasture conditions in all major pastoral and farming areas of the country, according to Somalia's Water and Land Information Management Agency, which is managed by the UN Food and Agriculture Organisation (FAO). Fewsnet expects food security in Iskushuban, Alula, Qandala and Bossaso districts in particular to weaken in the coming months.

The report also stated that water levels in both the Jubba and Shabelle rivers were low and falling, and not expected to rise again until the beginning of the main gu rainy season in April. On January 18th agencies operating in Somalia received US$15m from the UN Central Emergency Response Fund (CERF) to boost their humanitarian efforts. However, providing help to some of the country's most vulnerable populations remains very challenging, owing to the civil conflict and the decision of the Islamist rebels to ban foreign humanitarian agencies from operating in the territories under their control.

The 2011 Consolidated Appeal Process (CAP) for Somalia was launched on December 1st in Nairobi, Kenya, by aid agencies calling for US$530m to finance 229 projects by 15 UN agencies and 90 international and national non-governmental organisations that will address Somalia's most urgent humanitarian needs. Although significant, the sum represents an 11% drop compared with the total required in 2010, owing largely to an expected decrease in food assistance needs (which may now be revised), improved co-ordination structures and rigorous project vetting. At the time of the 2011 CAP launch, the 2010 CAP for Somalia was 69% funded, having received US$409m of the US$596m required. This made the Somalia appeal globally the second best funded in 2010, although US$179m of the 2010 funding was carried over from 2009.

The government has signed an agreement with a Dubai-based company, SKA Air and Logistics, to run Mogadishu's international airport. The ten-year deal, which was announced on December 27th, covers the renovation and upgrading of infrastructure at the airport, according to the SKA spokesman in Somalia, Yusuf Sheikh Ali, who released no other details. Mogadishu's airport is one of the areas under the control of the African Union Mission in Somalia (Amisom) and transitional federal government (TFG) troops, although it is vulnerable to mortar fire from the insurgents. SKA is a specialist provider of aviation services in risky places. It been operational in Iraq since 2003 and has recently expanded into Kuwait, the UAE and Afghanistan.

In mid-January a regional oil journal, Africa Oil and Gas, reported that the authorities in Puntland had extended their oil-drilling agreement with three exploration companies by a year. The extension, until January 17th 2012, was granted on the understanding that the joint-venture partners-two Canadian-based firms, Africa Oil and Lion Energy, and Australian-based Range Resources-drill one exploration well by July 27th and a second by September 27th. The extension applies to two production-sharing agreements (PSAs) that cover the Dharoor Valley Exploration Area and the Nugaal Valley Exploration Area. A proposal to sell a 20% interest in each PSA to Red Emperor, another Australian company, has also been approved by the Puntland government. Africa Oil's president, Keith Hill, stated that Puntland could hold similar oil reserves to the geologically related basins in Yemen, which contain more than 6bn barrels of discovered reserves.

However, the potential existence of significant reserves may not be sufficient grounds for optimism regarding oil prospecting in Puntland. First, although the breakaway province has been spared the worst of the country's civil conflict, this could change quickly. Indeed, the Islamist insurgents are reportedly planning to target the area. In such circumstances development of the onshore blocks in question is highly vulnerable to event risk. Second, the authority of Puntland officials to sign deals is questionable. Although the provincial government has unilaterally announced that it does not recognise the TFG's authority, a future national government could rescind any contracts that Puntland officials sign with foreign companies.

The Somaliland government is set to redouble efforts to secure international recognition as a sovereign state in the coming months, in the hope that the imminent independence of Southern Sudan will set a favourable precedent. Somaliland's foreign minister, Mohamed Abdullahi Omar, told journalists on January 18th that he would be citing the situation in Sudan in support of a "more aggressive policy" for international recognition with the African Union (AU) and a regional six-country grouping, the Intergovernmental Authority on Development.

However, the AU's position on Somalia-that it should remain a single state-is unlikely to change in the light of the referendum in Sudan. This was reflected in comments made by Ethiopia's foreign minister, Hailemariam Desalegn, in an interview on January 15th, in which he said that events in Southern Sudan would not lead Ethiopia to recognise Somaliland because Somaliland's independence is "up to the people of Somalia to decide". The transitional federal government (TFG) based in Mogadishu opposes the secession of Somaliland, which has a population estimated at 3.5m people, over one-third of the national total. Any likely successor to the TFG, whose mandate expires in August 2011, is likely to be similarly reluctant to allow the formal break-up of Somalia.

Somaliland's minister of finance, Mohamed Hashi Elmi, told the media on January 16th that the government had doubled the salaries of all employees in the military and the civil service. The announcement came after Somaliland's new president, Ahmed Mohamed Mohamoud Silanyo, refused on January 1st to sign a bill passed by parliament in mid-November to raise the salaries of members of parliament, a raise that he said would outrage many citizens. Although such a large pay rise would be greeted with joy by officials in most countries, in Somaliland many will have been disappointed, as the ruling party, Kulmiye, had pledged to authorise a staggering 300% salary increase across the board. The finance minister explained that this larger rise would not be immediately possible owing to the deficit that the new government had inherited from its predecessor, although he promised that public-sector salaries would continue to increase when conditions allowed. Nonetheless, the pay rise for all state employees is expected to have a significant inflationary impact. Consequently, the increase in buying power of public-sector employees is expected to be less than the rise in nominal terms would suggest.

The government is expected to present its 2011 budget for parliamentary approval in February, but there has been an early indication of how it will afford to double the state wage bill. On January 12th a local media organisation, Somaliland Press, reported that record high revenues had been collected from customs and duties in December, representing a year-on-year increase of 24.3%. Total revenue from fifteen entry and exit points was SoSh30.4bn (US$5.2m) in December 2010, compared with SoSh24.5bn for December 2009. The port at Berbera, by far the largest contributor to the Treasury's coffers, raised 75% of this total in December 2010, compared with 72% in the previous December. In absolute terms, Berbera raised SoSh17.7bn in December 2009, a sum that increased by 29% in December 2010 to SoSh22.8bn. Since taking up the finance portfolio, Mr Elmi has reshuffled the country's customs officers and appointed a new managing director, as well as implementing a new system by which all customs offices can be audited.

A plan to renovate Egal International Airport in Hargeisa and the international airport at Berbera was agreed in December with the government of Kuwait, which will provide US$10m in funding for the projects. Somaliland's aviation minister, Mohamed Hashi Abdi, said that the state-owned Kuwait Fund would manage the allocation of funds and contracting in order to heighten the project's transparency. The basis for the agreement was laid under Somaliland's previous administration. In June 2010 a delegation of civil engineers from Kuwait visited the country to assess the needs at Berbera and Hargeisa airports.