ITALY'S TRADE AND INVESTMENT RELATIONS WITH SOMALIA

UNCLAS SECTION 01 OF 02 ROME 002157

SIPDIS


C O R R E C T E D C O P Y (INFORMATION PARAGRAPH 2)
SENSITIVE
SIPDIS

DEPT FOR EUR/WE, EUR/ERA, EB/IFD/ODF, AF/E
USEU FOR PATRICIA LERNER

E.O. 12958: N/A
TAGS: EAID ETRD SO SW IT
SUBJECT: ITALY'S TRADE AND INVESTMENT RELATIONS WITH SOMALIA

REF: ROME 01870

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SUMMARY
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1. The MFA reports Somalia remains a political priority for
Italy (ref A),an assertion bolstered by Italy's providing
over 21 million euro in foreign assistance in 2005-2006 and
Italy's membership in the Somalia Contact Group. That said,
aside from some foreign assistance, Italy's economic ties to
its former colony are negligible. With total trade (exports
and imports) of 1.52 million euro in the first quarter of
2006, Somalia is Italy's 182nd largest trading partner. End
Summary.

Investment and Trade
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2. Italian exports to Somalia in 2005 were concentrated in
cereals (37.42%),vehicles (20.22%),and heavy equipment
(13.03%),while imports from Somalia were comprised largely
of leather goods, (72.90%). It is likely that additional
Italian exports make their way to Somalia via Kenya and other
bordering countries. The following figures do not/not
reflect this transit trade.

-------------- --------------
Italian Trade with Somalia (2001-2006)
(all figures in euros)
-------------- -------------- -------------- -------------- --------------
Year Exports Imports Total Trade Balance of
Trade
-------------- -------------- -------------- -------------- --------------
2001 4,365,489 2,151,402 6,516,891 2,214,087
-------------- -------------- -------------- -------------- --------------
2002 7,948,663 1,816,595 9,765,257 6,132,067
-------------- -------------- -------------- -------------- --------------
2003 4,112,106 729,077 4,841,183 3,383,029
-------------- -------------- -------------- -------------- --------------
2004 4,634,152 128,630 4,762,782 4,505,522
-------------- -------------- -------------- -------------- --------------
2005 1,884,557 307,251 2,191,808 1,577,306
-------------- -------------- -------------- -------------- --------------
2005 1,003,980 97,444 1,101,424 906,536
(1Q)
-------------- -------------- -------------- -------------- --------------
2006 1,082,411 440,728 1,523,139 641,683
(1Q)
-------------- -------------- -------------- -------------- --------------


3. The Italian export insurance agency, SACE (Export-Import
Bank equivalent),has 115 million euros in outstanding trade
finance loans for Somalia. A SACE officials described these
debts as "uncollectable."


4. There is no data available for Italian investments in
Somalia.

Foreign Assistance
--------------


5. Italy's 2006 bilateral foreign assistance supports
Somalia's Transitional Federal Government (TFG) with 3.5
million euro in emergency aid and logistics support, and the
Intergovernmental Authority on Development (IGAD),a regional
body attempting to broker peace in Somalia, with 250,000
euro. Italy also contributes two million euro to the UNDP to
disseminate information on the peace process, and to provide
2.7 million euro to the UN's Department of Political Affairs,
for peace process and political operations. Italy provided
ten million euro to the European Union's Somalia
Rehabilitation Program, to finance agriculture, health, and
education initiatives over a six-year period (the fund
reportedly totals 49 million euro). Italy has not donated to
the United Nations 2006 Somalia Consolidated Appeal Process.


6. The MFA Overseas Development Cooperation (ODC) officer
for Somalia, Giovanni Baticci, told EconOff July 14 that
Italy would like to co-host a conference on Somalia with
Sweden. However, he noted, the fighting between the Supreme

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Islamic Courts Council militia and warlords, and likely
Ethiopian engagement to protect the TFG in Baidoa, had put
plans for the conference (originally to be held at the end of
2006) on the back burner. Baticci said the GOI is awaiting
the joint UN - World Bank Somalia assessment report, which
should be available at the end of July. According to
Baticci, the report will help guide future GOI assistance
planning. Italy is a member of the Somalia Contact Group
(ref A),formed in June 2006, to support dialogue and
international engagement in Somalia.

Bank of Italy
--------------


7. The Bank of Italy (BOI) and the ODC historically provided
technical assistance to the Central Bank of Somalia (CBS).
The MFA's ODC paid transportation and logistics costs, while
the BOI provided the technical expertise. However, since
Somalia fired the CBS governor, the BOI has ceased its
assistance, and no new funds have been allocated.

Comment
--------------


8. Although Italy has political and historic ties to
Somalia, its economic interests there are negligible. While
the MFA will continue focusing political attention on, and
providing foreign assistance to, Somalia, trade and
investment relations are likely to remain minimal, so long as
the current situation in the failed African state continues.
End Comment.
SPOGLI