Plagued by separatism and terrorism, Somalia struggles to take advantage of its oil reserves

The Somali government announced in February that it would start awarding foreigners licenses for hydrocarbon exploration later this year despite criticism from the opposition, which warned that the Federal Parliament had yet to enact laws regulating the petroleum industry. The prospect of foreign direct investment led some analysts to wonder whether an oil boom could help Somalia overcome its challenges, which include not only separatism and terrorism but also an economy struggling to stay afloat.

On the one hand, sizable oil reserves turned Qatar, Saudi Arabia, and the United Arab Emirates from Middle Eastern backwaters into Arab regional powers. On the other, the petroleum industry fuelled corruption in Iraq, Sudan, and Yemen, all of which share Somalia's history of political violence. Somali experts question the ability of fossil fuels to address social issues best handled by good governance.

"Before we think about economic growth and the petroleum industry in Somalia, we Somalis must ask ourselves, 'Is Somalia safe to live in?' " said Abdihakim Abdullahi, co-founder and director of the Somali Institute for Democracy and Human Rights.

"Somalis are struggling with problems tied to poverty, the absence of healthcare and clean water, and a lack of schooling as well as ethnic conflict, corruption, political violence, crime, and violations of human rights such as freedom of expression."

Somalis are struggling with problems tied to poverty, the absence of healthcare and clean water, and a lack of schooling as well as ethnic conflict, corruption, political violence, crime, and violations of human rights such as freedom of expression

The duelling problems of corruption and poverty remain two of Somalia's greatest social issues. Of the 180 countries that Transparency International ranked on the Corruption Perceptions Index in 2018, Somalia achieved the highest score, indicating that observers consider Somalia the most corrupt country in the world. Meanwhile, 73 percent of Somalis live on less than two dollars a day, and 24 percent must survive on less than a dollar a day.

Tapping oil reserves could contribute to lifting Somalis out of poverty, but the cash flow from the petroleum industry may also feed political corruption in Somalia.

The Somali Civil War poses an additional complication. In many conflicts, natural resources turn into part of the war economy, and Somalia has proved no exception. Al-Shabaab, al-Qaeda's affiliate in the East African country, not only exports charcoal but also participates in the ivory trade and the lumber industry. The petroleum industry could give Somali extremists another economic opportunity to exploit. In Iraq, IS reaped impressive profits by seizing oil wells abandoned by the Iraqi Security Forces.

Tapping oil reserves could contribute to lifting Somalis out of poverty, but the cash flow from the petroleum industry may also feed political corruption in Somalia

"The Somali Civil War has not only hindered the petroleum industry but also cost thousands of civilian lives, collapsed institutions of the Somali government, and forced millions of Somalis to become refugees in countries across the world," Abdullahi told The New Arab.

Despite the trauma of the Somali Civil War, the Somali government continues to invest much of its energy in promoting the petroleum industry, sharing its data on oil reserves with potential investors. For their part, the major players in the petroleum industry appear wary of investing in Somalia, given its past instances of state collapse as well as the further danger of piracy in the Gulf of Aden.

In addition to appeasing skittish investors, Somalia will have to outcompete regional powers with their own oil reserves, including AMISOM member state Ethiopia, which still holds substantial sway in Somalia. For now, hydrocarbon exploration may just give Somalia more trouble than it needs.

Somali politicians may accomplish more by focusing their energies on already-developed sectors, foremost among them the telecommunications industry. Telephone companies such as Golis Telecom and Somtel Network have thrived during the Somali Civil War. Hormuud Telecom Somalia in particular has profited from Somalis' use of mobile phones. The United Nations Development Programme estimates that almost three quarters of Somalis employ mobile wallets to receive payments and send remittances.

While strengthening Somalia's economy may hold the key to peace and sustainable development, Somalis sound sceptical of what staking their financial future on oil reserves promises, noting how natural resources have served to aggravate political violence in countries elsewhere in the Global South.

"The petroleum industry will create more war and exacerbate existing rifts and political tensions between Somali states on how the resources should be distributed," argued Abdullahi.

"Natural resources have cursed many African countries, such as Angola and the Congo. Despite their riches, these countries have less economic growth, weaker governance, and slower development."