Business without government

Nov 19 2004 by Brian Amble Print This Article

How can you run a business in a country without any functioning national government?

In war-torn Somalia, which has been in a state of anarchy since 1991, telecommunications companies are booming despite the absence of any of the institutions or structures that most of us take for granted.

The BBC's Joseph Winter reports that three Somalian phone companies are engaged in fierce competition for both mobile and landline customers, with internet cafes springing up across the country. There are even plans to introduce 3G technology, including live video calling and mobile internet, next year.

With no regulation, no state-run monopolies Ė and no taxes Ė prices are the lowest in Africa, with free local calls for a monthly fee of $10 and international calls cost 50 US cents a minute.

It takes just three days for a landline to be installed - compared with waiting-lists of many years in neighbouring Kenya, where there is a stable, democratic government.

But what about security in a country with no legal system that is run by rival warlords?

. . . the warlords realise that if they cause trouble for the phone companies, the phones will stop working again, which nobody wants.

Nevertheless, this is far from being a free market utopia. As one telecoms entrepreneur says: "We badly need a government," he says. "Everything starts with security - the situation across the country."

Just don't think of trying to get away without paying your phone bill. "Contracts are enforced by relying on Somalia's traditional clan system," Winter writes - in other words, pay up on time unless you want a visit from some gentlemen carrying AK 47s.

Any bets as to how long it will take for this to appear as a business school case study?

BBC Online | Telecoms thriving in lawless Somalia