Economy

The international freeze on the assets and operations of Somalia's biggest telecoms and money remittance company has wide repercussions. Mattias Muindi reports

Somalia is on the verge of an economic collapse unparalleled in modern history.

This was the recently expressed view of the UN Humanitarian Coordinator for Somalia, Randolph Kent.

His words followed the recent closure by the American authorities of the Somali owned Al-Barakaat banking and telecommunications group following charges that it was aiding and abetting terrorism. This came after another major economic setback last year the ban imposed by the Gulf States on the export of Somali live- stock.

Somalis have become increasingly reliant on money transfers from expatriate friends and relations, a situation that has been hard hit by the freezing of the operations of Al-Barakaat which has operations in 40 countries world- wide.

It is estimated that 50 percent of transfers into Somalia are being affect- ed. With an economy struggling to keep on its feet, this is a major setback.

It is believed that other remittance companies have also been closed by US and United Arab Emirates' authorities despite the fact that they have not been linked to allegations of terrorism.

In mid-November, the US-based Con- cert Communications, a joint venture between AT&T and British Telecom, cut off the company's international gate- way, severing links to the outside world for many Somalis. Barakat Telecom has a 37 percent share in Somalia's telecoms sector.

The situation has put enormous pres- sure on the other telecoms operators who are struggling to keep up with the increased load. The company's customers can connect locally but not internationally.

Also affected are the operations of a large Mogadishu-based internet company. It was forced to close its operations after its state-owned United Arab Emirates' service provider can- celled its international access. The firm is owned jointly by three Somali companies - Telecom Somalia, Nationlink and Al-Barakaat.

The closure is the most manifest sign of increasing anti-Somalia sentiment from the US government, which has issued veiled threats that the US might extend its fight against terrorism to Somalia and perhaps neighboring Sudan which once had links with bin Laden.

The company has had its assets frozen amid allegations that money for the Al-Qaeda movement was moving through its network.

Washington has also claimed that Al Barakaat's founder, Ahmed Nur Jumale, fought alongside bin Laden in Afghanistan in the mid-1980s and that both are connected to the Al itihaad al Islamiya (Unity of Islam), a Somali- based militant group that Washington has implicated in international terror- ism. US officials also allege that bin Laden provided seed money for the establishment of Al-Barakaat in 1989.

Jumale has denied any links with bin Laden or Al-Qaeda. In an interview with the Financial Times, he said: "The US has fallen into the trap of Somali politics. They have fallen into a sophisticated political and tribal trap."

Current and former US officials have said that the US first began to suspect that Barakat was an al-Qaeda funding operation as far back as 1999 and began compiling intelligence information on the alleged links.

But the company has offered to co- operate fully with the investigation into the al-Qaeda organisation.

Jumale worked as a banker in Saudi Arabia throughout the 1980s. His rapid emergence as a high-profile investor in Somalia after 1993 surprised some in Somalia's business community, who wondered where his finance came from.

At the time of going to press, US Assistant Secretary of State for African affairs, Walter Kansteiner said that Somalia, with no central government to monitor the borders and a long history of anarchy, could attract not just terrorists' money but also terrorists themselves.

"There is no proper air traffic control in Somalia," he said. "It's pretty loose. There's that openness and opportunity 24 hours a day. It's a big country."

The US is yet to produce evidence for its claims against Somalia, saying the information is classified.

Apart from telecoms and banking, Al Barakaat also controls other important sectors of the Somali economy such as construction and agriculture.

"Shutting down the hawalad (Somali term for money transfers) is tantamount to condemning hundreds of thousand of Somalis to a slow death," says Yassin Khalif, manager of Amal, another money transfer agency.

Khalif says that a ban imposed on livestock imports from Somalia by Gulf states last year had left 80 percent of Somalis with no other source of income other than remittances.

He estimates that such transfers by the eight remittance agencies involves the movement of between $200-500 million per year, more than is pumped into Somalia annually by inter- national relief agencies.

The lack of a credible government means the country does not have the resources to attract foreign investors and international finance houses.

Khalif Farah, Al Barakaat's spokesman says if the US maintains sanctions, the firm will also suffer as it handles 25 percent of all remittances, around $140 million annually.

Al Barakaat's bank in Mogadishu will be particularly affected as the seizure of its assets makes it impossible for the bank to pay some $7 million it owes to businessmen in Mogadishu.

The move is also likely to affect inter- national relief agencies, most of which use companies such as Al-Barakaat to pay their staff in Somalia, a country whose formal banking facilities disintegrated in 1991.

Michel Del Buono, an economist, says that freezing Al Barakaat's assets will invite famine in Somalia as the country's food situation is already grave. "If we talk about the collateral damage of this decision, this is equivalent to killing civilians."

US Treasury Secretary Paul O'Neill has alleged that as much as 5 percent of Al- Barakaat's transfers were funnelled off to groups connected to bin Laden. He alleged that the money, totaling an estimated $25 million, was wired in installments below $10,000 to escape the attention of banking regulators.

Assets impounded in the US are estimated to be worth $43 million. Other assets have also been frozen in Europe and it was reported that Italian police were interrogating" 12 Somalis on charges of financing terrorism.

In neighboring Ethiopia, the government ordered the closure in Addis Ababa of all branches of Somali remittance banks.

Like all Islamic banking institutions, no interest is charged by money transfer companies, with the only expense being the cost of the service that is borne by the sender. There is little paperwork and the transfer is based on trust rather than official transactions.

The phone disconnection has affected Barakaat's 25,000 subscribers in Mogadishu and a further 15,000 others in Somalia's two breakaway regions of Somaliland and Puntland.

Most Somalis believe that Al-Barakaat is innocent.

They now fear that recent US statements and the blacklisting of Al-Barakaat are laying the ground for a return to Somalia of US soldiers after their humiliating exit from the country in 1995.

However, Kansteiner, said recently that the US had learned from experience. It would not return to the hasty tactics of the 1990s but would rather initiate a more pro-active dialogue with Somalis in future.

The best plan would be to offer sup- port for solutions thrown up by Somalis themselves but to avoid pushing the process in any particular direction. However, in a country like Somalia, split along many different and competing lines, this is likely to be difficult to sustain.