Creating and building a post-conflict fiscal state through global wealth chains. A case study of Somaliland
| Pages | 171-188 |
| Published date | 08 May 2018 |
| Date | 08 May 2018 |
| DOI | https://doi.org/10.1108/JMLC-05-2017-0019 |
| Author | Attiya Waris |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
Creating and building a
post-conflict fiscal state through
global wealth chains
A case study of Somaliland
Attiya Waris
University of Nairobi, Nairobi, Kenya
Abstract
Purpose –This paper aims to assess using a historical approach the challenges facing Somaliland and
analyze how the Somalilanders are in the twenty-firstcentury using the globalized financial architecture and
system of wealth chains to finance their nascent state and move the debate forward on the calls for self-
determination.
Design/methodology/approach –Research on this paper included not just a desk review but two
research trips to Somalilandand over 20 interviews of politicians, governmentofficials and the private sector
and academia.
Findings –Today the global wealth chains flowing in and out of Somaliland include somecomplex ones
which include the interactionswith other members of the Somali diaspora whether they are in the USA or in
Australia where money moves in and out of bank accountsin different countries finally ending up in either
Dubai or Djiboutiwhere it is finally transferred through the money transfer agencies into Hargeisaand finally
withdrawn by the relativeof a diaspora member. The similar wealth chains are those goingbetween traders
such as those that alreadymaintain companies in Djibouti because of thewar period and continue to live and
trade there but havebranches in Somaliland. There are simple direct transfers that are easilyunderstood.
Research limitations/implications –Translatorshad to be used, as some parliamentariansonly spoke
Kisomali.
Originality/value –No papers have been written on the global banking and finance systemwith specific
referenceto Somaliland.
Keywords Money laundering, Somalia, Self-determination, Global wealth chains, Somaliland
Paper type Research paper
1. Introduction
The creation and recognition of states is a complex and politically charged process that
requires negotiations and acceptance at global and widespread levels. In Africa, colonial
states (Sherman 2010,p.12)[1] were created by the imperial states where geographical
markings such as mountains, lakes and rivers were used to create the borders between
colonies and protectorates(Burnell et al., 2014, p. 176). Upon independence these boundaries
were either maintained or were joinedwith other protectorates and colonies under guidance
of the imperial state to form larger states (Griffiths 2000, p. 120)[2]. As a result, while some
states in Africa may be considered nation-states, more often than not African states are
either a state of many and/or nationssplit across several states (Zajda et al.,2008,p.146)[3].
As a result, ethnic communities were split along geographical demarcations that failed to
This paper was made possible by the “Systems of Tax Evasion and Laundering”(STEAL) project
funded by the TaxCapDev program under the Research Council of Norway (#212210/H30).
Case study of
Somaliland
171
Journalof Money Laundering
Control
Vol.21 No. 2, 2018
pp. 171-188
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2017-0019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
recognize the splittingof families and their property. This has resulted in families, clans and
ethnic communities or nations being split amongst not just two but often several states.
Dissatisfaction of ethnic communities over past colonial and protectorate border
demarcations has resulted in some ethnic nations choosing to exercise their right to self-
determination (Dersso2010, p. 258)[4].
To exercise the right to self-determination,a different measure is applied. Four elements
are used in international law to determine the recognition of the state in legal and political
theory: territory, population, government and capacity to enter into relations with other
states (Rai
c, 2002, p. 289). While internationallaw does not discuss the role finance plays in
state recognition, the process of recognition requires finance, specifically state finance. For
a state to exist, it must be a fiscal state and contain not only a fiscal governance structure
but also be able to effectively control and manage the fiscal resources of its people and
territory to both create and build its fiscal legitimacy as a state but also the fiscal social
contract with its people.
These four elements require finance in diverse ways.First, the population in compliance
to the process of independence and their commitment to financing the acts of the
unrecognized state must contribute to the stateeither through finance or through acts such
as joining the armed forces. Second, territory is maintained through security and the
maintenance and controlof borders forms the first part of clear territory and this can onlybe
accomplished by ensuring thatthere is defence of borders: in fiscal terms this requires paid
soldiers with munitions and structures or buildings to house them. Security and peace
within the border requiresa police force to keep law and order within the territory, as well as
ensure resources of the state and citizens are protected; similarly, this police force must be
financed. Third, governance requires a structure of fiscal governance structure that would
include not only an effective and efficient revenue authority or ministry of finance that is
able to collect finances and disburse it for recurrent expenditure and development projects
but also a government in place that practices good governance principles of transparency,
responsibility and accountabilityand that makes decisions with fairness and justice. These
key terms and elements are all part of fiscal legitimacy (Waris, 2013). Finally, recognition
includes the need to finance traveland lobby governments and this too requires resources.
The creation of the fiscal state becomes the first part of the developmentof the state. The
first action of a new government after peace is achieved would be to begin to collect
resources to run the activities of the state usually at this point in time, it is to ensure the
existence of a defence force and to maintain law and order. As a result, the first step to
securing the finances would be to create the fiscal social contract and the relationship
between citizen and state. This newly created contract is extremely fragile and there is a
need as a result to ensure that the resources collected are used as agreed. The use of
resources must be done with transparency, accountability, responsibility, efficiency,
effectiveness, fairness and justice: fiscal legitimacy is thus created and developed (Waris,
2013). The people, institutions and the state are all interlinked with each other in building
the fiscal state.
Conflict and post-conflict stateslike Somaliland are similar to other states in a globalized
world which have mobile individuals who remain loyal to the state but who no longer live
there, and as a result across borders set up institutionsand work while as refugees, migrant
workers or even foreign nationalswhile maintaining fiscal and other ties with their families
and friends within their state of origin (Lindley, 2010). As a result, in the globalized world,
we cannot simply include or refer to domesticresources and their movement, by necessity it
must include internationaland global movement of resources through the lines of the web of
movement and the nodes of states and institutionsthrough which resources pass to ensure
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