Privatization revolution has swept the world since the 1980s. Governments in more than 100 countries have moved thousands of state-owned businesses and other assets to the private sector. Airports, airlines, railroads, energy companies, postal services, and other businesses valued at about $3.3 trillion have privatized over the past three decades. (Edwards, 2016).
One of the major changes in Somalia over the past decade has been the growth of the private sector. Economic deregulation and privatization have accompanied the radical localization of governance. The growth of the private sector is closely linked to processes of globalization. In the context of weak and often ineffectual public administrations, the private sector is playing an instrumental role in providing social services and shaping development. As a market economy has replaced a centrally planned economy, development had become market-driven rather than government-led. (UNDP, 2001).
The population of Somalia is currently seeing the resurgence of public institutions, but there is little faith in their capacity to rise to the occasion. As a result, the process of regaining public trust anticipated to take some time, in large part because the country and its people suffered for a protracted period without any centralized national institutions or administration.
This article takes a brief look at Somalia’s private sector and how it operates effectively in terms of ports as private firms have expanded farther to supply basic infrastructure and social services, in the last decades, we have witnessed profound changes in maritime transport, which have modified the balance between capital and labor at seaports. Ports are now increasingly becoming capital-intensive industries, while in the past they used to be labor-intensive.
The technological advancements have created a highly competitive climate in the seaport business. The justification for public ownership of seaports has typically been that they are important for national economies and have unique qualities that make it easy for businesses operating port facilities to gain market dominance with expensive specialized assets, sunk costs, indivisibilities, and economies of scale.
. Even though the public sector has usually been present as port organizer, it is not evident that public organization of this industry is necessarily the best option. In particular, tighter public budgets and increasing fiscal needs have led many countries to seek private participation in seaports. Private firms’ involvement in ports is not new for the provision of services, since many firms were already present in ports around the world, but it is quite innovative in the construction of port infrastructures.
International experiences have shown that private participation in both these aspects operations and infrastructure has improved significantly the outcomes of some seaports. These experiences make a case for a revision of the traditional organization of seaports around the world, and Somalia is not exceptional. Somalia ensure that the best way that ports are becoming supportive of the national goals is to privatize them so as to introduce the performance and efficiencies associated with the private sector, currently; there are two basic economic sources that have been in low performance for the past years. Now, the government generated maximum revenue after privatization and transferred its ownership to a Turkish company called, Albeyrak, Mogadishu port and Mogadishu International airport.
Nearly five years ago, Mogadishu port organizer was public organization and that moment, the ports known as a working port. However, it worked not to its full capacity. Individuals and companies moved cargo through it. There were no proper structures for monitoring port activity, no proper revenue collection structures, no proper cargo handling equipment, and most of all, no will to turn the port into a revenue-crating venture. However, it waits financial help for the government, but, at the end of 2014, a Turkish private firm transferred to the operations of Mogadishu port in order to made renovation about it. Albeyrak has started modernizing the port with new equipment and technology that professionalize port services.
It was renovated at a cost $10 Million as the manager of Albeyrak, Mustafa Levant Adali, addressed. During its first month of operation under Albeyrak the port generated $2.7 million; Now Thousands of containers are delivered the port every month. The import and export business expected to grow further and generate more revenue for the federal government. This can be achieved privatization through improvements in efficiency and reductions in costs, which can translated into profit sharing possibilities. In addition, Somalia’s Federal government has given a Turkish firm a long-term contract to run and improve the Mogadishu international airport.
Turkish Favori Group and Somali government officials signed a 20 – year agreement to upgrade and run the operation of the airport by the firm. In addition, such kind of upgrading is part of privatization. At the same time, The Favori Group Company charged with bringing in new technology to modernize the airport to international standards and reliable services. Since 2011, Aden Adde international airport having a modern and standardized terminal of 15,000 square meters intended for the flights opened lastly its doors to travelers. The terminal was equipped with the climate-controlled air conditioners, security camera and finger print sensitive door, the glass walls, the seats and finest paints. The public private partnership was Favori and the Somali federal government signed public private partnership contract, which gives Favori full control of the airport for the coming 15 years or 5 years more. Improvement in aviation safety and general security situation in Somalia has prompted foreign airlines to launch flights to Mogadishu.
Said Eliye, director of operations and international relations at the Mogadishu international airport, said with the rising confidence in the country’s security, more international airlines were in talks to launch flights to Mogadishu in the coming years. His remarks came after Qatar Airways launched its direct flights from Doha to Mogadishu. The Qatar carrier is the fourth international airline to fly the Doha-Mogadishu route. Turkish Airlines, Kenyan airlines and Ethiopian Airlines are already operating daily flights into Mogadishu, while Uganda Airways recently announced plans to start scheduled flights to Somalia. Eliye said there are other commercial carriers from Egypt, the United Arab Emirates, Saudi Arabia and Uganda, which have expressed interest in operating flights to Somalia.
Finally, because of all this advancements we conclude that the process of reforms and privatization in the public sector in Somalia has improved government finances by raising revenues and reducing spending. More important, it has spurred economic growth and improved services because privatized businesses have cut costs, increased quality, and pursued innovation.
