SOMALIA: A COMPARISON OF WESTERN AND COMMUNIST AID PROGRAMS

Created: 5/1/1968

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directorate of intelligence

Intelligence Memorandum

omparison of Western and Communist Aid Programs

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CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence8

INTELLIGENCE MEMORANDUM

Somalia; onparlson of Western and Communist

Aid Programs

Summary

Since gaining its independence inhe Somali Republic has received aboutmillion in foreign economic aid0 million from Western countries and international organizations andillion from Communist countries. This has been ono of the largest aid programs in Africaer capita basis. Aboutercent of Western aid, but only an estimatedercent of Communist aid, has been in the form of grants for such purposes as_budget and exportinfrastructure, health, education, and technical assistance. These types of aid have improved the underlyingfor future

contributed to th. increase in

The Somali Republic has been too lacking in skilled manpower and financial resources, however, to make effective use of foreign aid for industrial and agricultural projects. Most such projects were

3 The term commitment, used for both Weetern and Communist programs, refere to estimates of foreign aid allocated to epeoifia end usee. This definition ie eynonomoue with the term obligation ae ueed in theeries. Aid and Trade Activities of Ccranunist Countries in Less Developed Areas of the Free World.

Sotej_ Thie memorandum uae produced solely bu CIA. It wae prepared by the Office of Eoonomio Research and wae coordinated with the Office of Current Intelligence.

undertaken under Communist aid programs. Many of these projects are operating below capacity and are unable to generate enough income to repay the loans used to build them* The Somali government has repeatedly requested and been granted moratoria on debt repayments

Total Western aid to Somalia will probably re* main close to recent levels over the next few years, although US bilateral aid is scheduled to end Italy has been and will continue to be the largest aid donor. Waning enthusiasm for Communist programs on the part of Somalia and on the part of the donor countries themselves, combinedecent shift toward the West in Somali foreign policies, probably will reduce Communist interest in major new aid commitments and will further contribute to the continuing decline in Communist aid over the next few years. On-going projects and technical assistance programs will, however,cvnmunist presence in Somalia for some time to come. (For general comparisons, see the charts and the map.)

v? ioa

Selected Western and Communist Aid Projects

M loo loo

Million US S

A Comparison of Aid for Infrastructure and for Productive Projects, by Donor, Total

lor projects not directly illeclifj proGuction *

Aid lor project* defined lo increase output directly"

UNION O' SOVIET SOCIALIST REPUBLICS

COMMUNIST CHINA

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Political-Economic

Since independence, successivehave received relatively massive foreignto develop the country's primitive economy. recently, at least, the development effort was hampered by Somali preoccupationreater m% Somalia, which would include those parts of Kenya and Ethiopia inhabited by ethnic Somalia and former French Somalilandnow called the French Territory of Afars and Issas. This irredentism prompted Somalia to maintain relatively large armed forces which in turn strained the budget and drew heavily on the small number of literate and technically trained personnel. When Prime Minister Egal came to power ineolicy of detente toward neighboring Kenya and Ethiopia partly, at least, to free the government's limited energies for attention to domestic affairs.

Somalia is remarkablyare almost none of the ethnic, cultural,divisions which plague much of the rest

of Eastern Africa. Economically there are some differences between the northern region, which, until independence, was British Somaliland, and the southern region, which was an Italian Trust Territory. Britain's interest in its colony centered on its strategic location at the mouth of the Red Sea, and the British legacy was an efficient administrative apparatus but very little economic development. Italy, however, encouraged emigration of Italian nationals and investment in its colony to the south with some success. Italian interests in southern Somalia remain strong, and these economic and cultural ties have been the reason for continuing official Italian aid.

Somali Republic lacks naturalskilled manpower. Approximatelyercentpopulation ofillion lives withinsector. Aboutercent areand the rest eke out ain primitive agriculture. Theis unable to meet domestic foodof low productivity and uncertainnearly half the country is pasturearable land. Exports, amounting to more

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thanmilliononsist almost entirely of livestock products and of high-quality but high-cost bananas. Economic development is severely hamperedack of natural resources, theA of the local market, the dearth ofand the scarcity of skilled and literate

omaliaive-year development plan which relied heavily on foreign aid and planned outlays ofmillion, later increased to approximatelymillion. Although Somalia failed to get all the aid it had hoped for, considerable sums were provided by the United States, Italy, and international organizations and smaller amounts by the USSR. During this plan period,power, and port facilities were improved, mainly with foreign assistance, but agriculture and industry, which absorbed nearlyercent of total development expenditures, did not develop commen-surately. Host of the manufacturing and agricultural projects completed under that plan are eitheror functioning well below capacity. The Mogadiscio dairy plant, the Las Khoreh fish canning plant, and the Tug Wajaleh and Giaraaraa state farms are examples of projects that have fallen short of expectations.

The first plan foundered not so much for lack of foreign aid as for lack of Somali technical and administrative skills needed for planning and implementing projects. Moreover, the government's inability to meet its share of financial commitments and to provide operating capital to completedgn^ributed to the plan's shortcomings.

The second development plan, scheduled to begin this year, is basedealistic appraisal of available resources. High priority is accorded projects to increase production of food and the major exportsand livestock products. Less emphasis is placed on health, welfare, and industrial prospects than in the first plan. The new plan also is heavily dependent on foreign aid.

SOG&EX.

countries and internationalhave committed0 million, orpercent, of all foreign aid received Aboutercent of Western aid has

een in the form of grants for development of infra-;structure and education and for budget and export subsidies. Increased exports of bananas, livestock, and livestock products have been made possible by improvements in transportation and port facilities. New power stations have made electricity available to more urban dwellers, and educational and medical services are now enjoyedarger, although still small, portion of the populace. The remainingercent has been project aid for industry, most of which has been in the form of interest-bearing loans. It is too oarly to judge the results of this aid because most of the projects are still under construe tion or only recently completod.

the major aid donor,illion in aid, of which anmillion was for budget subsidies andsupports. talian assistanceas Somalia's budget deficit wasas Somali bananas became more competitivemarkets. taly's commitmentsaboutillion, comparedillionand are expected to remain at or nearlevel for the next few years. Apartused to finance budget deficits and toexportubstantial part ofwas used to develop projects dominated byincluding Italian-owned plantations,and commerce. An important accomplishment

_ ^Achieved largely with Italian funds wasougher skinned, more durable banana that would withstand tho long trip to European markets. The remainder has been used to pay the salaries of Italian technicians and provide scholarships for Somali students in Italy.

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Somalia: Annual Aid Commitments by Western Countries and International

Italy

United states a, West Germany United Arab

Republic United Kingdom Saudi Arabia United Nations European

Economic

Community

9. Aid from the two other principal Western donors, the United States and West Germany, has fluctuated. West German aid has averaged aboutercent of US aid, but German commitments fell7 toillion, whereas US commitmentsillion.

Aboutercent of US aid, which totaledmillion by tho end of Fiscalas used to develop port facilities in Mogadiscio and Chisimaio. Aboutercent was committed toirrigation systems, livestock production, and forestry. Except for emergency food and flood relief, which accounted for an estimatedillion, most of the remaining US aid was spent on education, public safety, student scholarships, and technical assistance. Nearly half of the West Gorman aid was used to finance construction ofmile road from Chisimaio toextile mill,anana fiber plant. The remainder was assignedide range of technical assistance projects, an experimental farm, educational facilities, and equip-'jl rfor the national police force.

Tho. remainder of aid from Wostorn countries Came, mainly from the United Kingdom, the United Arab Republic, and Saudi Arabia. The United Kingdomon budget supportariety of small development projects mainly in the northern region,rwhich formerly was British Somaliland.

however, aid was suspended when diplomatic relations with the United Kingdom were broken because the British refused to give part of Kenya to Somalia. Economic assistance from the United Arab Republic has been allocated to agriculturalevelopment bank, housing, roads, and educational facilitiesredit extendedut little has been done to implement these projects. Saudi Arabian aid has been limited to one loan6 for regional airports and several smallprojects.

European Economic Community (EEC)about half ofillion in aidorganizations; the remainderUnited Nations affiliates and theAssociation (IDA). EEC aid consistsfor welfare projects, schoolinfrastructure, agriculturalstudent scholarships. Although the EEC madecommitmentsxpenditures undergrants will continue into the next UN agencies have granted moreprincipally for technical assistance,and training programs. 2 million loan for construction offrom Afgol to Baidoa. Interest ratesand repayments extendears, allowinggrace period.

Ccmmunist Aid

Soviet Union, Communist China,have extendedillionassistanceut only abouthad been committed to specific purposesend7 (see Aboutercent of.aid has been in the form of loans onterms, and tbe remainder was inCommunist loans bear no interest, include

a grace period, and call for repayment over ten or" more years. Some Soviet loans allow up to twelve

years for repaymentrace period, andis to be made in goods and convertible currency if acceptable goods are not sufficient. loans must be repaid in three to eight years starting one year after utilization offlon, and repayment may be made in goods or convertible currency. Extensions of Communist aid totaledillion1eflecting initial interest in the newly independent state. Tho Somalis appeared to be impressed by the Communist emphasis on visible andprojects such as state farms and industrialschemes. Praise turned to criticism, however, as Soviet projects experienced construction delays and output fell short of expectations.

Somalia:

2

Estimated Annual Aid Commitments by Communist

Million US S

USSR

Czechoslovakia Communist China

3

Total

Somalia and the USSR share responsibility for the failure to maximize benefits fromillion Soviet commitments. Somalia's in*$ij>ity to finance local costs has resulted in numerous delays of Soviet projects. Somalia'sto finance its share from local revenues may have led the USSR to double the initial quantity of commoditios to be sold on the domestic market in order to generate the necessary local currency. Moreover, the USSR failed to conduct adequate feasibility studies in some cases before undertaking projects, with the result that some projects have failed to meet operating costs or have been unable to compete in free markets. At the Soviet-built dairy in Mogadiscio and the fish-procossing plant

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uilt Michigan Technical Tnaining School in the, Aigoi AgjUcultuAat EKpz/Umzntal Ccntti.S

New Ho&pital in Mogadiscio, July

in Las Khoreh, for example. Inadequate supplies of raw materials for processing have limited output to far below capacity levels. The progress of the 'state farms at Tug Wajaleh and Giamama, which have been reduced in size from original plans,uffered from construction delays that stem from a

variety of causes, amonghortage of materials and labor. Other Soviet projects, including tworintingecondary school,adio transmitter, have been completed and function effectively. Although still unfinished, the new port facilities at Berbera also haveaided economic development.

China has agreed to supplymillion in aidut less thanthis has been committed to specifichas provided grants for budgetary support,andater tank trucks. Also, aof Chinese Communist doctors andare in Somalia. Czechoslovakboon minor and limited to medical suppliesequipment for the machinery pool, allhas been delivered.

Prospects

slight decrease in Somalia'santicipated over the next several yearslittle difference in the country's sloweconomic development. Somalia's majorboon the acute lack of natural andto assimilate and make effective useaid. Until largo improvements arethe educational level, in transportation, and'

asic agriculture, tha prospects for project aid that can pay for itself aro dim. The failure of the USSR to recognize this needasicwas one of the reasons that its earlier self-amortizing projects in Industry and agriculture were not particularly successful. In addition, the Soviet projects typify the difficulties that can arise when ill-conceived projects are developed in Isolation and are not procoded by adequatestudies.

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on-Communist aid steadily declined for several years and now appears to have leveled, off, except for US bilateral assistance which roseillion7 but is scheduled to be phased out Somali authorities apparently

that joint development of the Webi Shebelli River basin by Somalia and Ethiopia might qualifyegional project under the new US policy of replacing bilateral aid with assistance to regional development.

Italian subsidies to Somalia's budget and banana industry have been reduced and may decline still further, but development assistance probably will continue at present levels. West German aid fell sharply7 but seems likely to increase in the next few years. Aid from the UAR and Saudi Arabia has never been large or consistent, and the costs of the Arab-Israeli hostilities are expected to leadurther reduction or completeof these programs. Although diplomaticwith the United Kingdom have recently been resumed, that country probably will provide only token aid. International organizations are likely to maintain programs at past levels.

Although large amounts of additionalaid to Somalia are doubtful, moderate amounts of new credit may be forthcoming from the USSR, as was the case in Guinea, to bail out the projects to which the USSR has already committed its prestige. The lessons learned in small underdeveloped countries like Guinea and Somalia are evident in the more critical approach that the USSR has adopted5 toward project aid. Prospects for additional aii jrom Communist China are not promising, although small projects may be undertaken under3

line of credit, of whichillionremains uncommitted.

the economic outlook forgenerally dim, there are several brightclosure inf the Suez Canal,perishable bananas were moved to ItalianEuropean markets, resulted in anof this important export sector;five or six months,esult ofand handling techniques, exports had

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largely recovered. Bananas now move around the Cape of Good Hope in faster ships and arrive in better condition than before the closure of the canal* Thus, if and when the canal is reopened, Somali bananas will be more competitive than before and the need/for subsidies will be reduced orsooner than had been expected.

21. Inranium and rare earth deposits were found in Somalia and are now being surveyed. Initial results suggest that the uranium reserve mayons, or more than one-fourth the proved world reserves. Exploitation of these deposits could begin by thes and, if present expectations are borne out, couldexports by nearlyercent, orillion. However, the return to the Somaliin royalties and tax revenues would be relative small.

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