The manufacturing sector in Somaliland is currently operating at a 30% capacity due to lack of resources and government push. This means 70% of what the manufacturing sector should produce is not being achieved. The sector comprises a wide cross section of medium to small enterprises and has been steadily growing in recent years.
The Somaliland government needs to urgently promote and prioritise its approach on the running of its factories and their industrial production. In many parts of the world, governments encourage manufacturing sectors and industrial production by utilising incentives such as giving businesses subsidy and financial resources, land and tax relief. It is understandable that the Somaliland government is unable to give such enterprises huge resources however the Somaliland government can encourage the production levels to increase in its manufacturing sector and attract new businesses by not taxing the raw materials that these businesses import from abroad or at least reduce the tax on the raw material to the minimum possible.
According to Somaliland member of parliament Said M Elmi , Somaliland government under president Muse Bihi have increased the tax on small and medium businesses that import raw materials from abroad and have even reversed the tax relief that these businesses were given by the previous Somaliland government. The MP continued his criticism by stating that any businesses who were in the process of opening new factories or who were interested in the sector will be discouraged by this. Furthermore, such taxation on the industry could hinder current or future foreign investment.
Part of the manifesto of the current Somaliland government has been a pledge to create jobs for the Somaliland people however it appears that the increase of tax on the manufacturing sector is more likely to put pressure on these businesses which have huge ramifications for employment in the sector.
Somaliland Parliament committee for the manufacturing industry and economy have strongly criticised the governments approach by stating that ‘there are at least 5000 people who are employed in small and medium factories across the country, thus the governments policy will impact 5000 families who solely depend on these factories to continue to operate.’ Ultimately, the increase in taxation for these business may result in business closure which will impact the people of Somaliland as it increases the level of unemployment to new heights.
In the face of these challenges, the Somaliland government’s capacity to deliver key regulatory and promotional initiatives appear to be undermined by a lack of policy focus in part due to political and other considerations, related resource constraints, and an inability to measure performance against policy objectives. Thus, the Somaliland government needs to urgently take a new approach to the manufacturing sector which is the backbone of the Somaliland economy.
By :Ahmed A B Ibraahim
LLM International Law and BA Business Administration.