LONDON, Feb 24 (Reuters) - The breakaway enclave of Somaliland, which boasts oil and gas potential, has set up a UK-linked corporation to act as an entry point for investors concerned the Somali territory’s lack of international recognition would stop contracts being enforced.
On a visit to London to attend a conference on Somalia, President Ahmed Mohamed Silanyo told Reuters that the purpose of the Somaliland Development Corporation was to “to attract companies and institutions which want to invest in our country.”
“Since we are not a recognised country, insurance is always a difficult problem in Somaliland so if this can help with that, it would be useful.”
Somaliland declared independence from Somalia in 1991 and has enjoyed relative stability compared to the rest of Somalia, including the holding of a series of peaceful general elections, but remains unrecognised internationally.
Silanyo did not indicate what economic sectors he wished investors to target. But energy and mining minister Hussein Abdi Dualeh said in November the northern enclave had hydrocarbon potential with a geology similar to basins containing 9 billion barrels across the Gulf of Aden.
A number of big oil companies with permits to operate there left what is now Somaliland in the late 1980s and declared force majeure during Somalia’s escalating civil conflict.
Several foreign banks have expressed interest in operating in Somaliland where they are keen to capitalise on its untapped market potential. Somaliland has no formal banking sector and its people rely heavily on remittances from diaspora communities in Europe, North America and the United Arab Emirates, as there are no ATMs or loan facilities.
A briefing paper distributed to journalists on the sidelines of the London conference said that despite Somaliland’s “achievements in stability and democracy, international donors cannot deal directly with its government, and foreign investors face uncertainty about whether contracts - the basis of secure business - can be enforced”.
The SDC circumvented the problem of non-recognition by providing “a transparent, accountable and enforceable means by which investors can participate in Somaliland ventures”.
A not-for-profit company had been set up in Britain to act as the founding vehicle, with Somaliland’s Minister of State Mohamed-Rashid Hassan and Britons Myles Wickstead, a former diplomat, and Jeremy Carver, a retired international lawyer, as founding directors.
The SDC is owned by an incorporated trust, the Somaliland Development Corporation Trust, the paper said.
Oil discoveries would be a cash boon to Somaliland though hydrocarbons have often proven to be a curse to African nations as the opaque nature of the industry can breed corruption.
Colonised by Britain while the rest of Somalia was under Italian administration, Somaliland declared independence in 1991 as the rest of the country disintegrated into anarchy.
But the African Union and foreign powers have not recognised Somaliland. Many in the breakaway republic suspect the African Union fears its formal recognition would trigger a flurry of secession bids across the continent. (Reporting by William Maclean; editing by Ron Askew)