PM Hamza’s Dubiously Formulated National Transformation Plan for Somalia: Heading Toward Disaster

Opinion – In the tail end of May, the Office of the Prime Minister sprang forth with a National Transformation Plan (NTP), a grand vision aiming to reshape Somalia’s path toward wealth and resilience. The plan sports an ambitious agenda: invigorating the Private Sector via Public Private Partnerships (PPPs), enhancing government performance, and overhauling the economy. It touts itself as a departure from old-school development models, offering a dynamic, inclusive, sustainable alternative. Yet, this critique intends to peel back the finery of Prime Minister Hamza Abdi Barre’s overly idealistic scheme by scrutinizing its PPP aspect, revealing how such misguided ambitions fail to herald true “transformational” shifts in Somalia.

Conventional understanding holds that PPPs rarely function well in developing nations, especially in erstwhile conflict zones such as Somalia. The so-called “National Transformation Plan” leans heavily on the PPP approach for economic expansion. Alas, the Prime Minister seems oblivious to the hurdles PPPs face in developing regions: troubles in mobilizing private financing, deficiencies in transparency, mismanaged ventures. This scenario portends local businesses buckling under responsibility, leading to foreign entities assuming control—essentially christening a nation’s resources to outsiders.

Typically, a PPP sees a private firm helming, funding, and running large government projects, including public transit systems, recreational areas, medical facilities, and so forth. Frequently birthed under Build Operate and Transfer (BOT) agreements, more common in developing areas, PPPs serve cash-strapped governments by tapping into the private sector for massive infrastructure projects otherwise beyond their grasp. Despite being lauded, this model forgoes addressing core issues in Africa.

Under the BOT-PPP framework, private contractors manage the funding, construction, and operation of public structures (streets, roads) or facilities (power stations, dams) for set periods—perhaps two to three decades—recouping expenses via profit ventures before returning ownership to public hands at contract’s end.

Why is Somalia gravitating toward the PPP model? It’s speculated that PPPs find traction as a condition imparted by multilateral lenders upon the Least Developed Countries (LDCs). One could argue Somalia’s debt relief package inextricably linked itself with adopting PPP modalities.

Some economists suggest PPPs offer a half-step toward the complete privatization of public resources. A state that skillfully adopts comprehensive PPPs for “transformation” purposes likely neglects its duties. Within LDCs, PPP effectiveness manifests within niche or minor schemes, particularly within municipal confines—be it water services, sewer infrastructure, or desalination endeavors. These ventures heavily lean on subsidies and international aid, farther from guaranteed in Somalia.

Contradicting Somalia’s PM’s beliefs, PPP projects should ideally be limited in scope and duration, aimed at transferring fully established utilities to public oversight post-completion. Therefore, pinning national “transformational” schemes onto comprehensive PPPs proves shortsighted. Even though isolated projects might warrant private sector partnerships, they alone cannot drive holistic transformation as the Prime Minister aspires.

Like elsewhere, Somalia’s proposed PPP projects under the PM’s guidance carry formidable price tags and uncertainties for both taxpayers and governmental budgets. Additional expenses, cost overruns, and increased liabilities from potential contractor failures compound the issue. Proponents of the model argue it can deliver within timelines and budgets, yet estimating total costs for any PPP proves tricky. A projected $2 billion PPP cost may balloon to $10 billion, bringing substantial losses to taxpayers.

A December 2022 analysis dissecting global PPP failures—spanning health, education, infrastructure, water—underscored that large-scale PPPs fail to resolve developmental difficulties. The report, “History RePPPeated II,” highlighted overwhelming costs and risks saddled onto the public, alongside misdirected funds and undesirable environmental impacts, with women facing particular detriments. Every project examined lacked transparency and thorough community consultation.

Frankly, Somalia lacks robust oversight mechanisms for PPP endeavors, exposing Prime Minister Hamza to cautionary tales of nonviable projects potentially derailing national economic progress.

Even industrial strongholds falter; London’s troubled Metro system illustrates this. In the early 2000s, agreements with two consortia faltered as private entities bungled maintenance and upgrades, culminating in their termination and subsequent public takeover—leaving British taxpayers to shoulder immense financial burdens.

The PM needs to understand that PPPs in a developing country bring substantial risks. Effective PPP-driven investments require sturdy legal, fiscal, and policy frameworks for nurturing private investment. Somalia’s existing regulatory weakness leaves long-term partners unprotected, increasing risk. Political instability compounds this threat, given governmental changes could terminate ongoing agreements, triggering further fiscal losses through bailouts or litigation.

Furthermore, Somalia’s PM needs to recognize that PPPs might burden public finances since taxpayers eventually foot the bill. The state might impose higher fees or taxes to reclaim expenses—a significant strain on the mostly impoverished Somali citizens.

Somalia requires a solid revenue collection system for successful PPP ventures. Lacking such a system, Somalia faces challenges in economic sustainability and funding social services. Preceding limited PPP adoption, many countries conduct trial projects evaluating feasibility; evidence of Somalia’s adherence to such protocols remains absent.

Currently, evidence-based research proving PPP efficacy in LDCs is missing. PPPs are predominantly infrastructural or municipal-centric and don’t drive comprehensive economic reform, making them unsuitable for national “transformation.” Even if advantageous for infrastructure, they afford scant impact on human development indicators.

The PM doesn’t grasp that PPP viability hinges on a developed industrial framework—hardly applicable to impoverished nations like Somalia. A reasonable fit only in countries with middle-income economies, Somalia’s lack of foundational infrastructure complicates meaningful PPP-driven transformation. Development experts opine that fully public or private enterprises provide greater project efficacy compared to PPPs.

Undoubtedly, the burgeoning private sector has rejuvenated Somalia’s economy, excelling in telecom, banking, fintech, and education. But the PM overlooked that the private sector flourishes independently, untethered to state entanglements. Thus, integrating the private sector into a PPP framework risks breeding corruption and malfeasance.

While the NTP’s transformational agenda professes high ambitions, without industrialization, transformation remains out of reach. American economist Walt Rostow outlines stages of economic growth—from “traditional to preconditions for take-off, then take-off, and finally maturity.”

Although Somalia outgrew the “traditional” phase, it languishes pre-take-off, neither ready for manufacturing development nor positioned for the industrialization Rostow deems pivotal.

Under past military rule, Somalia witnessed brief industrial progress. However, subsequent civil war decimated these achievements, causing economic collapse and stagnation between preconditions and take-off.

European and Western transformations hinged on industrial revolutions, not fantasy “transformative” schemes. In Somalia’s present condition, pushing a “transformational plan” without an industrial foothold borders on folly.

For a struggling nation like Somalia, the PM should regard the developmental state model—where state-led initiatives guide economic and industrial resurgence—as key. State-building and an unwavering focus on industrial policy are cornerstones of national development.

Post-war Asian countries embraced developmental state models, propelling places like Japan, Korea, Hong Kong, Taiwan to rapid economic ascension. The pseudo-market-oriented PPPs favored by the PM won’t usher Somalia into a transformed future.

Instead of an ungrounded PPP-based “transformational plan,” Somalia should internationally seek a comprehensive Marshall Plan, funded extensively by development partners, aimed at meeting its developmental and reconstruction objectives.

Domestically, the PM’s office ought to retire the NTP, refocusing on a reimagined National Development Plan steeped in industrial vision and supportive state-building, aligning strategies with on-the-ground realities. This foundational approach nurtures transformative progress driven by industry, innovation, and creativity.

Deeq Haji Darwish – Chairman, Somali Intellectual Group (SIG)

Chair.sig@gmail.com

Disclaimer: The perspectives in this article belong solely to Deeq Haji Darwish and do not represent Axadle’s official viewpoint. Axadle does not claim the accuracy or completeness of the contents herein. Readers are encouraged to draw their own conclusions.