Somalia’s two-year (2014-15) Economic Recovery Plan (ERP) provides a roadmap for Somalia’s transition from emergency relief to economic recovery by placing among its priorities rapid upgrading of state capacity and rapid rehabilitation of infrastructure (including ports) as well as financial sector regulation and supervision. With regard to the private sector, the government’s vision focuses on the enabling business environment by providing basic infrastructure and effective regulation. The project supports the ERP and the implementation approach is closely aligned with initiatives to strengthen governance in the Central Bank of Somalia (CBS) and the procurement systems under the Financial Governance Program.
Component 1: Strengthening CORE Economic Institutions
Strengthen the economic institutions in three critical areas of the economy: (i) central banking, to allow for the emergence of a formal financial sector, which would improve access to finance; (ii) the Ministries of Commerce and Industry, to support the introduction of a basic and more modern legal and regulatory framework that would reduce transaction costs for entrepreneurs; and (iii) local port and customs authorities, to leverage private capital, networks and expertise to improve performance of the port sector.
• Strengthen Central Bank supervision and regulation
• Improve the business environment by reducing the time and cost of starting and operating a formal business
• Develop the port sector in Mogadishu, Kismayo, Marka and possibly Bossaso
Component 2: Expanding Economic Opportunities
Provide direct support to the private sector—through technical assistance and grants—to expand economic opportunities in the country.
• Support the recovery of the private sector by providing matching grants to support small and medium-sized enterprises (SME).
• Promote the development of SMEs through direct and indirect capacity building support.
Component 3: Project Management
Institutional support for project implementation and supervision.
Since early 2014, the bank accounts of the majority of Somali (commercial) remittance providers in the UK, US and Australia (and to a lesser extent in Scandinavia) have been closed. This is part of the broader global “de-risking” discussion. The particular context of Somalia – with a lack of a formalized financial sector and a quantifiable terrorist threat – intensifies the risk situation and affects the decisions taken by financial institutions. Given the critical importance of remittances to Somalia, the Somali government, remittance providers and civil society have called for a public sector-led response. Remittance flows continue to reach Somalia, with limited impact to date on the magnitude and cost of remittances, as private sector players have been resourceful in finding alternatives. The overall situation however remains fragile.
The World Bank will contribute to medium-term regulatory and supervisory capacity building efforts in Somalia. The activities will support the Federal Government of Somalia to establish a plan to support the flow of remittances to Somalia. This project will be closely coordinated with the longer-term World Bank project, the Somali Core Economic Institutions and Opportunities Program (SCORE), already endorsed by the SDRF Steering Committee. These activities will also be complementary to the actions being undertaken by other donors.Component 1: Drafting of Money Transfer Business (MTB) Regulations
In order to facilitate the immediate strengthening of the regulatory framework for the MTB sector, the World Bank will work with the CBS to draft and enact MTO Operating Regulations that are based on the draft AML/CFT Bill, to which the World Bank has already provided technical assistance. The regulations are to include provisions for customer due diligence, recordkeeping, ongoing monitoring, reporting, internal controls, consumer protection, and risk management. They will apply to all registered and licensed MTBs operating in Somalia. The WB will also work with the CBS to draft and enact MTB Customer Registration Regulations, which will apply to customers of all MTBs to ensure a level playing field.Component 2: Placement of Trusted Agent
As longer-term capacity building initiatives are put in place through the Bank’s SCORE program, the SRFS Project will initiate efforts in the short term by embedding an external firm to work alongside the CBS to begin on-site and off-site supervision: the “Trusted Agent”. The Trusted Agent will also build capacity at the CBS to ultimately transfer this responsibility back to the authorities. The Trusted Agent will administer on behalf of (and in coordination with) the CBS on-site and off-site supervision to ensure that the MTOs and their agents comply with the regulations mentioned above and meet the requirements on an on-going basis. The Trusted Agent will carry out ongoing training of CBS staff. The World Bank will undertake the procurement of the Trusted Agent.Concept Note
Somalia’s perceived petroleum potential holds potential for revenue streams that could contribute to the inclusive economic development of the country. A recent assessment requested by the Federal Government of Somalia re-confirmed that addressing the political challenges of petroleum development is a prerequisite to peace and security and that the international community can play a facilitating role. This project responds to a direct request made by the Minister of Petroleum and Mineral Resources (MPMR) for programmatic support for the petroleum sector.
Component 1: A process to harmonize issues of ownership, control and revenue sharing
This project will facilitate a series of high-level consultative meetings over a period of approximately eighteen months, to be attended by relevant Somali stakeholders. The objective of the meetings is to support the mediation of an agreement on a Somali solution for petroleum ownership, control and revenues sharing.
• Phase 1: Political accommodation
• Phase 2: Technical knowledge-building workshops
• Phase 3: Consultative meetings between authorities from the Somali Peninsula
• Phase 4: Somali authorities will subsequently be responsible for updating the constitutional and legal framework with respect to the definition of ownership, management and revenue sharing of petroleum resources that meets the legitimate expectations of all Somali stakeholders.Component 2: Focused Technical Assistance
This Component is focused on priority actions in line with the Annual Strategic Plan of the Ministry of Petroleum and Mineral Resources (MPMR).
• Review of the petroleum legal, regulatory and fiscal framework.
• Strengthen the technical and commercial capacity of the MPMR Negotiation Team related to Petroleum negotiations.
• Build Capacity in the Ministry of Petroleum and Mineral Resources on policy, legislative and institutional development
Beneficiaries Primary audience: Federal Government of Somalia (FGS), government authorities in Somaliland and regional governments.
Secondary audiences: Somali private sector, international investors, Somali and international CSOs and wider international community.
Government Counterparts Ministry of Petroleum & Mineral Resources
Implementation Arrangements Executed by the World Bank on behalf of the Government
Geographic Coverage This component will be designed to benefit all participating Somali stakeholders equally. The World Bank brings neutral convening power and expertise.
For more information on the progress of this project, please visit http://www.somaliatraining.com/.
Somalia's Petroleum Sector Legal, Regulatory, and Fiscal Framework
The Minister of Petroleum and Mineral Resources formally requested that the World Bank provides programmatic support to the petroleum sector in Somalia. As part of this support, the World Bank contracted Gide Loyrette Nouel and EY Council to provide consultancy services for a “Review of the Petroleum Sector Legal, Regulatory and Fiscal Framework of Somalia”.
For the review the Consultants studied the existing legal, regulatory and fiscal framework applicable to hydrocarbons activities in Somalia and compared it to the framework applicable to hydrocarbons activities in similar countries and to the current trends of hydrocarbons legislation.
Based on their findings, the consultants provided guidance to the Somali authorities to set the future applicable framework in Somalia. This guidance is structured as advice for enhancement of the existing framework, meaning mainly the 2008 Federal Petroleum law and the Model PSA.
The consultants compiled their recommendations in a report presented in draft for comments at a workshop held in Nairobi on June 2 and 3, 2016. The final report is available here.
Building Knowledge on Oil and Natural Gas Contracts
The Federal Government of Somalia (SFG), with the facilitation of the International Law Institute-African Centre for Legal Excellence (ILI-ACLE) and the World Bank, embarked on a program to provide training on oil and gas contracts to key Somali stakeholders.
This program, implemented from August 2015 to December 2015, had the following objectives: i) to provide training to the SFG team on petroleum and gas contracts and to strengthen their technical and commercial capacity in this area; and ii) to assist the SFG in building a foundation for a federal approach to the development of natural resources.
To achieve the objectives, the ILI-ACLE carried out two six-week seminars in Kampala, Uganda and on-the-job training and mentorship activities.
Seminar I, the first six-week training that took place from September 14 to October 21, 2015, was designed to enhance the capacity of parliamentary and government officials from the SFG to effectively negotiate and manage petroleum agreements and participate in national and cross-border transactions in light of the legal, fiscal and social implications arising from the exploitation in the oil and gas sector.
Seminar II took place from November 12 to December 18, 2015, and it was designed to enhance practical skills and the application of negotiation and management of petroleum agreements, deeper attention to fiscal and economic issues related to oil and gas, and strengthening training skills to enhance the participants’ ability in sharing and disseminating this knowledge through training.
The on-the-job training and mentorship were held during the two weeks the participants had in-between Seminars I and II. This component involved remote one-to-one mentoring with each participant over a period of two days to address challenges faced in their jobs or work on exercises developed by their mentors.
The participants attending both seminars were granted Advanced Certificate in the Legal and Economic Considerations in the Oil and Gas Sector.
The Federal Government of Somalia and the World Bank signed a Memorandum of Understanding in 2014 to facilitate a consultative process aimed at harmonizing issues related to the ownership, management and revenue sharing of petroleum resources between Somali stakeholders.
Once issues related to the ownership, management and revenue sharing of oil and gas have been fully harmonized, the Bank - in cooperation with other donors - intends to continue supporting the federal, as well as the regional authorities, to develop the petroleum sector so that it supports the inclusive and sustainable development of Somalia for decades to come.
The consultative process
Harmonization of ownership, management and revenue sharing of petroleum resources can only be achieved through the active participation of all relevant Somali stakeholders. As part of this effort, the FGS and the World Bank identified relevant federal and regional stakeholders and provided access to knowledge on how federal societies around the world have dealt with resource management issues so that solutions for Somalia can be jointly explored.
The consultative process has four phases:
• The first phase of political accommodation carried out in 2015, served to understand the realities and expectations from relevant decision makers across Somalia and agree on the importance to have an open space for knowledge and dialogue.
• The second phase of the process consisted of two technical knowledge-building workshops held in Nairobi, Kenya in December 2015.
The workshops, held in Nairobi in December 2015, convened representatives from the Federal Government of Somalia (FGS), Puntland, Galmudug, Jubaland and South West State. The workshops, organized by the Ministry of Petroleum and Mineral Resources (MoPMR) of Somalia, provided technical information designed to bring all participants to the same level of knowledge on all aspects required to create a shared vision for the Somali petroleum sector.
• The third phase of the process started in January 2016 and consisted of consultative meetings between authorities from the Somali Peninsula with the aim of reaching a common understanding and vision for the development of the petroleum sector in Somalia.
• In the fourth phase, Somali authorities will subsequently be responsible for updating the constitutional and legal framework with respect to the definition of ownership, management and revenue sharing of petroleum resources that meets the legitimate expectations of all Somali stakeholders.
The international community contributes to this program through the Multi-Partner Fund for Somalia (MPF).
The past decade has seen both an expansion of the petroleum sector to new exploration contexts, but also increased attention to extractive industries transparency and a growing focus on good governance, resulting in the fast growing availability of information from licensing and contracting to beneficial ownership to project operations to revenues to resulting spending and tracking development outcomes. This shift towards a norm of greater sector transparency is aligned with broader efforts to document good practices for the sector. The list below includes links to resources and tools that should be of relevance for sustainable and well-governed petroleum development.
Guidelines for Good Governance in Emerging Oil and Gas Producers | Chatham House | June 2015
The Guidelines for Good Governance in Emerging Oil and Gas Producers, compiled under the auspices of the New Petroleum Producers Discussion Group, review common challenges facing emerging producer countries in the phases of exploration, recent discoveries and early production. See more at: https://www.chathamhouse.org/publication/oil-gas-good-governance-guidelines#
EI Source Book the Extractive Industries Source Book provides developing states with technical understanding and practical options around oil, gas, and mining sector (EI sector) development issues. http://www.eisourcebook.org/
It also includes the Extractive Industries Initiatives Database where you can search for initiatives with specific criteria http://www.eisourcebook.org/754_ExtractiveIndustriesInitiativesDatabase.html
• Association of International Petroleum Negotiators– useful site for model contracts, webinars on negotiation topics and to track relevant events. See: https://www.aipn.org/
• Negotiations Support Portal - A portal to support host country governments with planning, negotiating, implementing and monitoring large-scale investments. http://www.negotiationsupport.org
• Resource Contracts-The world’s first database of publicly available oil, gas and mining contracts (370 from 54 countries, and fast expanding.) The platform is designed to enable searchability, provide annotations and summaries of key fiscal, operational, environmental and social provisions to aid understanding and comparability. A learning tool for governments, industry and civil society alike. http://www.resourcecontracts.org
Country-specific sites are available to help governments disclose their extractives contracts in an accessible and useful way. One example is the Guinea-specific ContratsMiniersGuinee.org.
• Guides covering the clauses and terms of contracts
"Oil Contracts: How to Read and Understand Them" explains how to read the contracts which govern the oil industry. Written by a group of world-class oil experts and professionals in October 2012 using a "book sprint" methodology. http://openoil.net/understanding-oil-contracts/
Oil and gas sector: The law firm Allen and Overy compiled this guide to common terms in oil and gas contracts, along with a wide range of information about the types of clauses used. https://www.documentcloud.org/documents/563543-guide-to-contract-terminology-oil-amp-gas.html
• Contract Monitoring Roadmap- aimed at better understanding the ‘how to’ of contract monitoring in the extractive industries sector. It provides a structure to contract monitoring, questions you should ask if you want to monitor oil, gas or mining contracts, and examples and ideas of how others are tackling these issues all around the world. See: http://wb.azure.inprogress.co.za/ (English) [new permanent web link coming soon]
• OpenOil repository– hopes to contribute to the world’s oil contracts available at a click. Open data structures are key for that, and this repository proposes a draft file naming convention, and define the scope of this initial release http://repository.openoil.net/wiki/Main_Page
Extractive Industries Transparency Initiative – learn more on the global standard and multistakeholder initiative that now has 49 member countries via their website: http://www.eiti.org
See examples of EITI Going Digital:
OpenOil Data | OpenOil in partnership with OpenCorporates - includes the OpenOil: Corporate Network Navigator With over 1,000 affiliate companies is more than 80 jurisdictions, BP controls a complex network of corporate entities. This map of BP’s corporate structure shows their ownership relations, using only public disclosures that BP itself has made. It also includes key financials for 150 of the companies registered in the UK. The Nigeria network graph displays oil contracts and companies in Nigeria, aiming to shed more light on the sector, by showing how companies in Nigeria’s oil and gas sector are connected through primary production contracts and secondary service contracts, as well as their ownership structures. ( https://data.openoil.net/)
Open fiscal models:
• Global Witness- Uganda PSA Oil and Gas – open model and guide on how to use it: https://www.globalwitness.org/reports/good-deal-better/
• NRGI- oil revenue forecasting model for Ghana’s Jubilee Field:http://www.resourcegovernance.org/publications/forecasting-ghanas-oil-revenues-2015-budget-using-fiscal-model-jubilee-field
Innovative Approaches in Multi-stakeholder Engagement- The governance challenges surrounding the extractives sector impact all stakeholders and are hard for government to solve alone. The World Bank documented in this publication a variety of innovative approaches in multi-stakeholder engagement through support to implementation of the Extractive Industries Transparency Initiative. http://bit.ly/WBMSIinEI
New Producers Must Manage Great Expectations in a Time of Low Oil and Gas Prices blog | Patrick Heller, Natural Resource Governance Institute (NRGI) | July 13, 2015- See more at: http://www.resourcegovernance.org/news/blog/new-producers-must-manage-great-expectations-time-low-oil-and-gas-prices
New petroleum producers survey policy options in wake of oil price slump article |Commonwealth Secretariat |July 3, 2015 - See more at:http://thecommonwealth.org/media/news/new-petroleum-producers-survey-policy-options-wake-oil-price-slump#sthash.tNFMeY4S.dpuf
Communities of Practice:
- New Petroleum Producers Discussion Group- The aim of this collaborative project is to enhance the capacity of emerging oil and gas producers to establish context-appropriate rules and institutions for good governance of their petroleum sectors and to engage credibly with international partners. You can join here: https://www.chathamhouse.org/about/structure/eer-department/new-petroleum-producers-discussion-group-project
- GOXI- is a growing global community of practice of 3,000+ members from government, industry, civil society, academia, and donor agencies, promotes shared learning and networking, thus enriching the work of all those involved in extractives governance. Sign up directly at http://goxi.org
Supporting Connectivity for the Higher Education Sector Program
The Federal Ministry of Posts and Telecommunications acts as the implementing agency supporting connectivity to the higher education sector, supporting Somalia’s Research and Education Network (SomaliREN). The World Bank also working with the UbuntuNet Alliance, through the AfricaConnect Initiative, to support connectivity for the higher education sector in Somalia beyond the REN system.
The main objective behind the EU AfricaConnect initiative is to engage in a conditional financing scheme laying the internet backbone for the continent’s regional Research and Education Networks (RENs), enabling connection points to member National Research and Education Networks (NRENs) to connect to the regional REN, and linking regional RENs to the global REN community via connections to the European research and education backbone network global Research and Education network, GÉANT.
The UbuntuNet Regional Network is the regional research and education Internet backbone network in Eastern and Southern Africa that connects Southern and Eastern African NRENs to each other and to the global REN network via GÉANT. The UbuntuNet Alliance is the organization that manages and operates the UbuntuNet backbone network and is the responsible party that will provide all technical, financial, and infrastructural support to Somalia as a member NREN under the AfricaConnect Initiative.
Somalia’s REN, SomaliREN, has notionally been a member of the UbuntuNet Alliance since 2009, but has hitherto been unable to provide its 20% share of the conditional financing (€280,000) required for linking the NREN with UbuntuNet regional backbone network.
SIM registration policies have swept rapidly across the African continent with implementation motivations stemming in large part from a practical interest in improving security environments. The benefits of SIM registration have been under emphasized and under-utilized by many governments so far. The World Bank and the Government of Somalia are discussing the benefit of the policy for Somalia, the development of the relevant knowledge and governance capacity in both public and private sectors, to implement SIM card registration.