SOMALIA: A COMPARISON OF WESTERN AND COMMUNIST AID PROGRAMS

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• Collection: General CIA Records
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• Document Creation Date: December 27, 2016
• Document Release Date: May 14, 2010
• Sequence Number: 2
• Publication Date: May 1, 1968
• Content Type: IM

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DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Somalia: A Comparison of Western
and Communist Aid Programs
ER IM 68-52
May 1968
copy N! " - - 4 3
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by ar; unauthorized person is prohibited by law.
GROUP I
L?xeluded from automatic
downgrading and
dedaaificotlon
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
May 1968
Somalia: A Comparison of Western and Communist
Aid Programs
Summary
Since gaining its independence in July 1960, the
Somali Republic has received about $330 million in
foreign economic aid commitments* -- nearly $260
million from Western countries and international
organizations and almost $70 million from Communist
countries. This has been one of the largest aid
programs in Africa on a per capita basis. About 80
percent of Western aid, but only an estimated 10
percent of Communist aid, has been. in the form of
grants for such. purposes as -budget and export sub-
sidies, infrastructure, health, education, and
technical assistance. These types of aid have
improved the underlying conditions for future
development and have contributed to the increase in
exports.
The Somali Republic has been too lacking in
skilled manpower and financial resources, however,
to make effective use of foreign aid for industrial
and agricultural projects. Most such projects were
The term commitment, used for both Wester,-and
Communist programs, refers to estimates of foreign
aid allocaL`ed to specific end uses.
Note: This memorandum was produced solely by CIA.
It was prepared by the Office of Economic Research
and was coordinated with the Office of Current
Intelligence.
SF.(:RF.T
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undertaken under Communist aid programs. Many of
these projects are operating below capacity and are
unable to generate enough income to repay the loans
used to build them. The Somali government has
repeatedly requested and been granted moratoria on
debt repayment.
Total Western aid to Somalia will probably re-
main close to recent levels over the next few years,
although US bilateral aid is scheduled to end in
1970. Italy has been and will continue to be the
largest aid donor. Waning enthusiasm for Communist
programs on the part of Somalia and on the part of
the donor countries themselves, combined with a
recent shift toward the West in Somali foreign
policies, probably will reduce Communist interest
in major new aid commitments and will further
contribute to the continuing decline in Communist
aid over the next few years. On-going projects and
technical assistance programs will, however, insure
a Communist presence in Somalia for some time to
come. (For general comparisons, see the charts and
the map.)
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SOUTHERN
YHr1EN
GIU13A / O-U.S.
OO -U.S.
-U.S.S.R.
+ -EEC
"i, -Comm. China
BOUNDARY REPRESENTATION IS
NOT NECESSARILY AUTHORITATIVE
SOMALIA: Selected Western and Communist Aid Projects
,41u Agricultural experimental station
? Dairy processing plant
4yc Fish processing plant
+ Hospital
Radio station
Meat canning plant
Port facility
Road
- - - Road under construction
' State farm
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Somalia: A Comparison of Aid for infrastructure
and for Productive Projects, by Donor, Total for 1961-67
Million HS $
UNITED
NATIONS
COMMUNIST
CHINA
CZECHO-
6.7 SLOVAKIA
1 ,,0.3
2.2
*Including expenditures on items such as health,
education, transport, and budget subsidies
**Chiefly plcnt and equipment, farms, etc.
Aid for projects not directly
affecting production*
Aid for projects designed to
increase output directly**
UNION OF SOVIET
SOCIALIST REPUBLICS
EUROPEAN
ECONOMIC
COMMUNITY
UNITED FI
ARAB 20,3
REPUBLIC UNITED
KINGDOM SAUDI
I1 ARABIA
8.2
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Million US $
100 f
Somalia: A Comparison of Levels of Western
and Communist Aid Commitments
1961-67
WESTERN AND INTERNATIONAL AID
80
20
1961 1962 1963
1964
1965 1966 1967
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Somalia: Aid Commitments, by Donor, Total for 1961-67
UNITED STATES
59.3
UNITED NATIONS
27.3
UNITED 4RAB
REPUBLIC
11.2
EUROPEAN ECONOMIC
COMMUNITY
26.8
WEST GERMANY
23.4
UNITED KINGDOM
8.2
COMMUNIST CHINA
9.7
CZECHOSLOVAKIA
2.5
ITALY (MILLION US $)
98.1
SAUDI ARABIA
5.0
TOTAL $327.3
25X1
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UNION OF SOVIET
SOCIALIST REPUBLICS
55.8
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Political-Economic Setting
1. Since independence, successive Somali govern-
ments have received relatively massive foreign assist-
ance to develop the country's primitive economy. Un-
til recently, at least, the development effort was
hampered by Somali preoccupation with a Greater
Somalia, which would include those parts of Kenya
and Ethiopia inhabited by ethnic Somalis and former
French Somaliland -- now called the French Territory
of Afars and Issas. This irredentism prompted
Somalia to maintain relatively large armed forces
which in turn strained the budget and drew heavily
on the small number of literate and technically
trained personnel. When Prime Minister Egal came
to power in mid-1967, he inaugurated a policy of
detente toward neighboring Kenya and Ethiopia partly,
at least, to free the government's limited en,~rgies
for attention to domestic affairs.
2. Politically, Somalia is remarkably cohesive.
There are almost none of the ethnic, cultural, or
religious divisions which plague much of the rest
of astern Africa. Economically there are some
differences between the northern region, which, until
independence, was British Somaliland, and the southern
region, which was an Italian Trust Territory.
Britain's interest in its colony centered on its
strategic location at the mouth of the Red Sea, and
the British legacy was an efficient administrative
apparatus but very little economic development.
Italy, however, encouraged emigration of Italian
nationals and investment in its colony to the south
with some success. Italian interests in southern
Somalia remain strong, and these economic and
cultural ties have been the reason for continuing
official Italian aid.
3. The Somali Republic lacks natural resources
and skilled manpower. Approximately 90 percent of
the population of some 2.5 million lives within the
subsistence sector. About 70 percent are nomadic
pastoralists, and the rest eke out a precarious
existence in primitive agriculture. The farming
sector is unable to meet domestic food requirements
because of low productivity and uncertain rainfall,
although nearly half the country is pasture or
potentially arable land. Exports, amounting to more
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than $30 million in 1967, consist almost entirely
of livestock products and of high-quality but high-
cost bananas. Economic development is severely
hampered by a lack of natural resources, the small-
ness of the local market, the dearth of infrastruc-
ture, and the scarcity of skilled and literate man-
power.
4. In 1963, Somalia launched a five-year
development plan which relied heavily on foreign
aid and planned outlays of $196 million, later
increased to approximately $280 million. Although
Somalia failed to get all the aid it had hoped for,
considerable sums were provided by the United States,
Italy, and international organizations and smaller
amounts by the USSR. During this plan period, trans-
port, power, and port facilities were improved,
mainly with foreign assistance, but agriculture and
industry, which absorbed nearly 40 percent of total
development expenditures, did not develop commen-
surately. Most of the manufacturing and agricultural
projects completed under that plan are either in-
operative or functioning well below capacity. The
Mogadiscio dairy plant, the Las Khoreh fish canning
plant, and the Tug Wajaleh and Giamama state farms
are examples of projects that have fallen short of
expectations.
5. The first plan foundered not so much for
lack of foreign aid as for lack of Somali technical
and administrative skills needed for planning and
implementing projects. Moreover, the government's
inability to meet its share of financial commitments
and to provide operating capital to completed plants
contributed to the plan's shortcomings.
6. The second development plan, scheduled to
begin this year, is based on a realistic appraisal
of available resources. High priority is accorded
projects to increase production of food and the
major exports -- bananas and livestock products.
Less emphasis is placed on health, welfare, and
industrial prospects than in the first plan. The
new plan also is heavily dependent on foreign aid.
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Foreign Assistance from Western Sources
7. Western countries and international organi-
zations have committed about $260 million, or about
80 percent, of all foreign aid received since 1961
(see Table 1). About 80 percent of Western aid has
been in the form of grants for development of infra-
structure and education and for budget and export
subsidies. Increased exports of bananas, livestock,
and livestock products have been made possible by
improvements in transportation and port facilities.
N3w power stations have made electricity available
to more urban dwellers, and educational and medical
services are now enjoyed by a larger, although still
small, portion of the populace. The remaining 20
percent has been proj3ct aid for industry, most of
which has been in the form of interest-bearing loans.
It is too early to judge the results of this aid
because most of the projects are still under construc-
tion or only recently completed.
8. Italy, the major aid donor, has committed
nearly $100 million in aid, of which an es t4
$50 million was for budget subsidies and banana
price supports. Since 1964, Italian assistance has
declined as Somalia's budget deficit was reduced
and as Somali bananas became more competitive in.
foreign markets. In 1967, Italy's commitments fell
to about $8 million, compared with $11.5 million in
1964, and are expected to remain at or near the
current level for the next few years. Apart from
funds used to finance budget deficits and to support
banana export Frices, a substantial part of Italian
aid was used to develop projects dominated by Italian
interests including Italian-owned plantations, light
industry, and commerce. An important accomplishment
achieved largely with Italian funds was the develop-
ment of a tougher skinned, more durable banana that
would withstand the long trip to European markets.
The remainder has been used to pay the salaries of
Italian technicians and provide scholarships for
Somali students in Italy.
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Somalia: Annual Aid Commitments
by Western Countries
and International Organizations
1961-67
Millicn us $
1.961
1962
1963
1964
1965
1966
19
67
Total
Italy
United Stat
31.1
16.0
11.5
11.5
11.0
9.0
8.0
98.1
es a/
West German
-
4.1
14.8
8.2
3.4
7.7
5.0
16.1
59.3
y
United Arab
0
4.7
6.5
3.2
3.9
4.0
1.1
23.4
Republic
United Ki
11.2
0
0
0
0
0
0
11
2
ngdom
Saudi Arabia
4.5
0
3.7
0
0
0
0
0
0
0
.
8
United Nations
3
5
0
0
5.0
0
7.3
5
.0
European
.
0.5
3.1
1.0
11.2
2.3
5.7
27.3
Economic
Community
0.3
13.6
0
6.5
6.4
0
0
26.8
54.7
53.3
29.3
25.6
40.2
25.3
30.9
259.3
a. US aid is for the fist year endi--ag 30 June.
9. Aid from the two other principal Western
donors, the United States and West Germany, has
fluctuated. West German aid has averaged about 40
percent of US aid, but German commitments fell in
1967 to $1.1 million, whereas US commitments reached
a record $16.1 million.
10. About 35 percent of US aid, which totaled
over $59 million by the end of Fiscal Year 1967, was
used to develop port facilities in Mogadisci o and
Chisiinaio. About 25 percent was committed to agri-
culture, irzigation systems, livestock production,
and forestry. Except for emergency food and flood
relief, which accounted for an estimated $5 million,
most of the remaining US aid was spent on education,
public safety, student scholarships, and technical
assistance. Nearly half of the West German aid was
used to finance construction of the 72-mile road
from Chisimaio to Gelib, a textile mill, and a
banana fiber plant. The remainder was assigned to
a wide range of technical assistance projects, an
experimental farm, educational facilities, and equip-
ment for the national police force.
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11. The remainder of aid from Western countries
came mainly from the United Kingdom, the United Arab
Republic, and Saudi Arabia. The United Kingdom con-
centrated on budget support and a variety of small
development projects mainly in the northern region,
which formerly was British Somaliland. In 1963,
however, aid was suspended when diplomatic relations
with the United Kingdom were broken because the
British refused to give part of Kenya to Somalia.
Economic assistance from the United Arab Republic
has been allocated to agricultural schemes, a
development bank, housing, roads, and educational
facilities under a credit extended in 1961. but
little has been done to implement these projects.
Saudi Arabian aid has been limited to one loan in
1966 for regional airports and several small manu-
facturing projects.
12. The European Economic Community (EEC) pro-
viaecl about half of the 54 million in aid from
international organizations; the remainder came
from United Nations affiliates and the International
Development Association (IDA). EEC aid consists of
grants for welfare projects, school construction,
basic infrastructure, agricultural diversification,
and student scholarships. Although the EEC made no
new commitments in 1967, expenditures under several
earlier grants will continue into the next several
years. UN agencies have granted more than $21 mil-
lion, principally for technical assistance, health,
welfare, and training programs. In 1965, the IDA
provided a $6.2 million loan for construction of a
road from Afgoi to Baidoa. Interest rates are
nominal and repayments extend 40 years, allowing a
10-year grace period.
Communist Aid
13. The Soviet Union, Communist China, and
Czechoslovakia have extended about $90 million in
economic assistance since 1961, but only about $70
million had been committed to specific p'lrposes by
the end of 1967 (see Table 2). About 90 percent of
Communist aid has been in the form of loans on quite
favorable terms, and the remainder was in grants.
Chinese Communist loans bear no interest, include
a grace period, and call for repayment over ten or
more years. Some Soviet loans allow up to twelve
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years for repayment after a grace period, and repay-
ment is to be made in goods and convertible currency
if acceptable goods are not sufficient. Czecho-
slovakia's loans must be repaid in three to eight
years starting one year after utilization of each
portion, and repayment may be made in goods or
convertible currency. Extensions of Communist aid
totaled about $80 million between 1961 and 1963,
reflecting initial interest in the newly independent
state. The Somalis appeared to be impressed by the
Communist emphasis on visible and large-scale
projects such as state farms and industrial develop-
ment schemes. Praise turned to criticism, however,
as Soviet projects experienced construction delays
and output fell short of expectations.
Somalia: Estimated Annual Aid Commitments
by Communist Countries
1961-67
Million US $
1961
1962
1963
1964
1965
1966
1967
Total
USSR
0
44.3
0
1.0
2.0
8.5
0
55.8
Czechoslovakia
C
2.5
0
0
0
0
0
0
2.5
ommunist China
0
0
8.0
0
1.5
0.2
0
9.7
2.5
44.3
8.0
1.0
3.5
8.7
0
68.0
1.4. Somalia and the USSR share responsibility
for the failure to maximize benefits from the esti-
mated $56 million Soviet commitments. Somalia's
inability to finance local costs has resulted in
numerous delays of Soviet projects. Somalia's in-
ability to finance its share from local revenues
may have led the USSR to double the initial quantity
of commodities to be sold on the domestic market
in order to generate the necessary local currency.
Moreover, the USSR failed to conduct adequate
feasibility studies in some cases before undertaking
projects, with the result that some projects have
failed to meet operating costs or have been unable
to compete in free markei;s. At the Soviet.-built
dairy in Mogadiscio and the fish-processing plant
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Soviet-Built PAtin.ting BuL ding U.aed in
Co't in Vetta, July 1964
Soviet-Built Radio S.ta,tLon in Mogadiec.to,
Decembn 1967
USAIV-Bu itt IAAiga.tLon Canal a.t the A6goi
AgAicut-tuAat ExpeAimen,ta.C Cen-teA, 1966
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(ISA1V-L;uiCt MMiclli.dall 7*('0l-li.ca(' 7'(a.6Luq S(:IIUOe
({I tll(' Ajjt(. Ay/i(.C (1('lll~((((' 1_x~~l''((111('llta(' ~~('lII(''1~
May 1908
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1 1. C-6ui('t Nrl' Ilusf,.it(' ilt ,41ga(Iiciu, _11(('11
196.1
('11i11('S('-LiuiC( Nitti('Ili(t' llt(tr'r il; '1'111isi',
19("7
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in Las Ithoreh, for example, inadequate supplies of
raw materials for processing have limited output to
far below capacity levels. The progress of the
state farms at Tug Wajaleh and Giarnama, which have
been reduced in size from original plans, has
suffered from construction delays that stem from a
variety of causes, among them a shortage of materials
and labor. Other Soviet projects, including two
hospitals, a printing plant, a secondary school,
and a radio transmitter, have boon completed and
function effectively. ?although still unfinished,
the new port facilities at Berbera also have no-
tably aided economic development.
15. Communist China has agreed to supply about
$23 million in aid since 1961, but less than half
of this has been committed to specific tasks.
China has provided grants for budgetary support, a
theater, and 30 water tank trucks. Also, a small
number of Chinese Communist doctors and agricultural
technicians are in Somalia. Czechoslovak assistance
has been minor and limited to medical supplies and
mechanical equipment for the machinery pool, all of
which has been delivered.
Prospects
16. The slight decrease in Somalia's foreign
aid anticipated over the next several years will
make little difference in the count..y'n slow rate
of economic development. Somalia's major problem
has been the acute lack of natural and human
resources to assimilate and make effective use of
foreign aid. Until large improvements are made
in the educational level, in transportation, and
in basic agriculture, the prospects for project aid
that can pay for itself are dine. The fai lure of
the USSR to recognize this need for a basic infra-
structure was one of the reasons that its earlier
self-amortizing projects in industry and agriculture
were not particularly successful. In addition, the
Soviet projects typify the difficulties that can
arise when ill-conceived projects are develoned3 in
isolation and are not preceded by adequate feasibil-
ity studies.
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17. Non-Communist aid steadily declined for
several years and now appears to have leveled off,
except for US bilateral assistance which rose to a
record $16.1 million in 1967 but is scheculed to
be phased out by 1970. Somali authorities apparently
hope that joint development of the Webi Slrebelli
River basin by Somalia and Ethiopia might qualify
as a regional project under the rew US policy of
replacing bilateral aid with asststance to .regional
development.
18. Italian subsidies to Somalia's budgee and
banana industry have been reduced and may decline
still further, but development assistance probably
will continue at present levels. West German aid
fell sharply in 1967 but seems likely to increase
in the next few years. Aid from the UAR and Saudi
Arabia has never been large or consistent, and the
costs of the Arab-Israeli lioutiliLies are expected
to lead to a further reduction or complete elimina-
tion of these programs. Although diplomatic rela-
tions with the United K.i ngdom have recently been
resumed, that country probably will provide only
token aid. International organizations are likely
to maintain programs at past levels.
19. Al'-,hough .lar.cle amounts of additional Coin-
munist aid to Somalia are doubtful, moderate omou-.:*s
of new credit may be forthcoming from the USSR, as
was the carve in ;uine.a, to b:iil out the projects to
which the USSR has already Committed it!; pre:; t isle.
The lc ;:;on:; learned in r;ni.r 1 1 t_trulerdeveloped countries
like Guinea and Somalia arc? evi eic-nt: ill the more
cri ti.ca l approach that the tt::::Ir h., : .~,1,?,?L, '1 .;; c.
1965 tow,.1rd project aid. t'ro::pe ctr fors additional
aid Cram Communi!;L China arc not promi::incl, a.1 thouclh
';mall projects may be undertaken under the 1`)t,3
line of credit, of which :;()me 1`113.0 million ipp.rr-
ently remain; ur:cornmitted.
20. Al though the ecc~nomi c out look for 1;oma 1 i a
ic; generally dint, there are sever ~l bright.
The c1o!;urn' in mid-19(,7 of the ,uc?r Canal,
which perr::hablc banana:: were movi?d to I La1 ian and
other European market;, resulted in an i.mmc?diato
di-;location of this important export rector; but
within five or month:;, as a result of new
marketincl and handling technique.:, export:: had
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largely recovered. Bananas now move around the
Cape of Good Hope in faster ships and arrive in
better condition than before the closure of the
canal. Thus, if and when the canal is reopened,
Somali bananas will be more competitive than before
and the need for sur,sidies will be reduced or elimi-
nated sooner thar. had been expected.
21. In December 1967, uranium and rare earth
deposits were found in Somalia and are now being
surveyed. Initial results suggest that the uranium
reserve may total 250,000 tons, or more than one-
fourth the proved world reserves. Exploitation of
these deposits could begin by the early 1970's and,
if present expectations are borne out, could in-
crease exports by nearly 50 percent, or about $15
million. However, the return to the Somali govern-
ment in royalties and tax revenues would be relatively
small.
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