How to support Somalia’s tech sector

Somalia’s ICT sector – particularly mobile communications – is already one of the brightest spots in its economy. It could soon reach a tipping point where market competition, equitable distribution and demand-driven efficiency can grow exponentially and transform operating environments for both government and individual citizens.

Despite, or perhaps because of, the lack of a public sector presence in a 20-year civil war, private, unlicensed mobile companies, using satellite for international communications, have emerged to meet the high demand for communications, especially with the large Somali diaspora. In terms of mobile penetration rates, Somalia is a leader in the region, with higher rates and lower prices than neighboring Djibouti and Ethiopia, which both enjoy higher levels of stability but retain state-owned monopolies.

However, the current lack of a legal framework for both the ICT and financial sectors is a source of risk potentially cramping the Somali economy. Critical areas – including remittances, mobile banking and mobile-money services and mobile services – are influenced and, in some cases, controlled by large companies. The market structure is still evolving, with de facto consolidation around larger companies, resulting from mergers and alliances. Although consolidation can bring some consumer benefits and help in achieving economies of scale, the future licensing framework will need to take into account competition policy considerations and enforce interconnection.

An important opportunity for the passing of regulation for the ICT sector, in the form of Somalia’s Communications Act, is now at hand.

On June 2-4, 2015, the Ministry of Posts and Telecommunications of Somalia (MPT), the World Bank and Albany Associates (a communications services firm) jointly organized aworkshop on telecommunication regulation at the World Bank offices in Nairobi. The workshop provided a unique forum for 13 members of the Communications Committee of the Somali Parliament and two presidential advisors to go through regulatory process outlined in the draft Communications Act and lay out the role and responsibilities of a new regulatory communications authority in preparation for presenting the draft Communications Act before Parliament for final review.

In August 2012, the Federal Government of Somalia (FGS) came to power with a four-year term under a provisional constitution approved by a new parliament, thus ending Somalia’s long period of revolving transitional government at the federal level. This transition marked the first time since 1991 that Somalia has a federal (rather than transitional) government and a widely supported provisional constitution. During this period of momentum and reconstruction, a first draft of the Communications Act had been prepared in 2012, and an extensive consultation process had followed. However, due to several changes in Minister, as well as the ending of the mandate of the Transitional Federal Government in August 2012, the draft Act was only approved by the Cabinet in October2014.[1]

The draft received a first reading in Parliament in December 2014. Chaired by the Somali Deputy Minister of Posts and Telecommunications, H.E. Jamal Hassan Ismail, the June workshop in Nairobi aimed to give the members of the Parliamentary Communications Commission a chance to debate amongst themselves and to ask questions before presenting the draft for a second reading in Parliament, which could lead to the passing of the law.

This juncture comes at a time of great momentum within the sector. In July 2014, a historic interconnection agreement was reached between Somalia’s three main operators.[2] The year 2014 also marked the coming of fiber connectivity to Mogadishu, and at relative low cost, thanks to the West Indian Ocean Cable Consortium (WIOCC) undersea fiber-optic EASSy cable, which was financed by WIOCC’s shareholders, including IFC and run by local Somali shareholder Dalkom.[3] Thirdly, since May 2014, the private sector has been making regular monthly payments to the national treasury in lieu for formal licenses. The new law will recognize this progress and, with more formal institutional arrangements, place it onto a more stable footing.

Background on World Bank support
The World Bank’s ICT Sector Support Program in Somalia is working with the Federal Government of Somalia (FSG) to protect and maximize the impact of this recent progress. The project aims to actualize the World Bank’s twin goals of ending poverty and boosting shared prosperity. On June 15, the Minister of Finance of Somalia signed new grant agreements that will expand the scope of the program.

• Phase 1 of the project has focused on technical support for the ICT legal and regulatory framework and enabling environment (e.g. Sector regulation, independent regulatory authority, licensing framework), as well as setting up three pilot communications rooms in government key ministries. Early results are proving positive, with the passing of the Communications Act recognized as an important step for future progress and a foundation for the sector.
• The newly launched Phase 2 will focus on ensuring that connectivity in Somalia is both efficient and equitable, by:
  • Expanding the initial communications rooms pilot to support fifteen key ministries and institutions across different economic zones
  • Supporting connectivity and education resource networking for universities—in the main urban centers such as Mogadishu, Garowe and Hargeisa.
  • Supporting the development and implementation of effective frameworks for mobile money and for SIM card registration.
• A possible Phase 3 is being planned that could focus on further extending connectivity from the coast into the interior of the country. The scope of this component depends on correlation with the World Bank’s cross-sectorial Horn of Africa regional initiative, public private partnerships, and other co-financing opportunities. Some preparatory funding started under the Public-Private Infrastructure Advisory Facility (PPIAF)[4] to develop an initial strategy and public-private partnership (PPP) options study supporting the ICT sector and broadband connectivity in Somalia.

Yet, despite substantial regulatory, infrastructural and sector-level progress, there is a risk that, if the Communications Act is not passed, further development of the ICT sector and its contribution to the economy, may be constrained.

The Federal Government of Somalia has been actively consulting with the industry and other crucial stakeholders to ensure that the regulation is a win-win for the ICT Sector and will allow better, enhanced and sustained services for Somali citizens.  On the workshop’s final day, the Parliamentarians met in a closed session to plan steps towards a critical juncture in a regulatory process that has been in development for over three years. The next few months are therefore likely to be crucial in shaping the future environment.