SOMALIA - PRIVATE FINANCING FOR THE TFG

UNCLAS SECTION 01 OF 02 NAIROBI 002129 SENSITIVE SIPDIS DEPT FOR AF/E E.O. 12958: N/A TAGS: ECON EFIN PGOV PINR SO SUBJECT: SOMALIA - PRIVATE FINANCING FOR THE TFG ¶1. (SBU) Summary: On October 1, AF/E,s Senior Somalia Desk Officer and the Djibouti Somalia Watcher met with Banque Pour le Commerce et l,Industrie ) Mer Rouge (Bank for Commerce and Industry ) Red Sea; BCIMR) CEO Ould Amar Yahya at the Djibouti main office. BCIMR is the only international bank currently operating in Somalia, with a branch in Hargeisa. Yahya noted that the Hargeisa branch has been so successful that BCIMR is in talks with the TFG to open additional branches in Somalia wherever and whenever the security situations permits. He also offered suggestions on providing a baseline budgetary level for the TFG through private financing. End summary. -------------- -------------- Somali Businesspeople are the Engine of Regional Growth -------------- -------------- ¶2. (SBU) AF/E,s Senior Somalia Officer and the Djibouti Somalia Watcher discussed Somalia's economic outlook with BCIMR's Yahya on October 1. Yahya presented an optimistic prediction for the future if security was achieved, noting that Somali businesspeople that deal in every imaginable commodity sold throughout the region are the foundation of BCIMR's deposit base. Somali qat (a leaf that produces a mild narcotic effect when chewed) livestock, sugar, pasta, edible oil and cement in particular have enjoyed particularly high profits in recent years; and are the backbone of the regional economy. A score of dealers in these commodities have current individual accounts worth more than $150 million each, and there are hundreds of other accounts in the seven to eight-figure range, Yahya said. And those are just the accounts for individual Somali businesspeople. When you add corporate, local and national government, NGO, international organization and individual accounts, Yahya said that BCIMR's projected growth for 2009 was in the process of being revised upward, despite the global economic crisis. As soon as the security situation permits, Yahya continued, BCIMR plans to provide financing for companies involved in Somalia infrastructure repair projects, such as the Berbera port renovation project proposed by the French-owned Bollore Africa Logistics Group. -------------- --- Who Benefits From Somalia's Continuing Disarray? -------------- --- ¶3. (SBU) At a time when local, regional and international actors are coalescing behind the TFG, friends of Somalia have to acknowledge who benefits from disarray in Somalia and discuss ways that they could reap similar benefits from a re-unified Somalia, Yahya said. Local and international businesspeople make astronomical profits (despite the risk) since they are relieved of the necessity of paying the normal costs of doing business in a stable society. Front-line states receive income, as well as international assistance, that would go to a unified Somalia if it existed. And, international organizations and NGOs that are created to work in Somalia expend the bulk of their resources on supporting ever-increasing staffs that work "on" Somalia in Nairobi, but with few in-country initiatives. -------------- How to Privately Finance the TFG -------------- ¶4. (SBU) Yahya believed that it would be possible for the Somali private sector to provide a baseline budget for the TFG. If the TFG would launch an appeal to Somali business people to contribute, say, one half of one percent of their yearly profits, the TFG would have a substantial financial base from which to work. Funds could be distributed through and accounted for by the Price Waterhouse Coopers mechanism. The TFG might also provide each contributor with an incentive that would meet his needs. Once prospective international investors saw Somali businesspeople successfully investing in the rebuilding of their country, Yahya concluded, the full spectrum of expeditionary companies such as Petronas (already in Ethiopia) would rapidly follow. -------------- BCIMR/Yahya Antecedents -------------- ¶5. (SBU) BCIMR is a subsidiary of the French Group Bred Banque Populaire. The group is present in 71 countries, using well-known names such as NATIXIS, COFACE and Banque NAIROBI 00002129 002 OF 002 Populaire. It is the largest bank in the Horn of Africa, with 60 - 70 percent of deposits and 51 percent of the loans distributed. During its fifty years in Djibouti, BCIMR has been a key facilitator of regional economic development, in particular in Ethiopia, Somalia, Yemen, and Eritrea. Its headquarters is in Djibouti City. The Hargeisa branch opened in February 2009, and was the first to be opened by an international bank in Somaliland. ¶6. (SBU) Ould Amar Yahya is a French national of Mauritanian descent. In addition to being the CEO of BCIMR, he is the President of the Djibouti Professional Banking Association. A senior French banking official, Yahya was the director of the Commission des Operations de Bourse (French Stock exchange) market surveillance department before he was dismissed in 2000 for suspected insider trading. He was quickly rehabilitated and picked up by Bred. When Bred bought BNP-Paribas, interest in BCIMR early in 2007, Yahya was made CEO. -------------- Comment -------------- ¶7. (SBU) There now seems to be local, regional and international will to support the TFG in its quest to "take back" Somalia. As a result, policymakers and implementers must include discussions on how to put Somalis in the forefront of any durable solution and ensure that proposals for such a solution feature concrete suggestions on how those who have benefited from a generation of disorder could reap even more benefit from a Djibouti Process designed to produce stability. HOZA