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Somaliland Small-Scale Industries Development And Constraints

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TABLE OF CONTENTS Acknowledgement 1 Dedication .1 Declaration_________________________________________________________1 Abstract_____________________________________________________________1 Chapter One____________________________________________________________2 Introduction_____________________________________________________________2


1.2 Problem Statement ............................................................................................................4 1.3 Purposes of the Paper.........................................................................................................5 1.4 Structure of the Paper.......................................................................................................6

Chapter 2_______________________________________________________________7 Literature Review________________________________________________________7


2.1 Definition of Industry:........................................................................................................7 2.2 Types of industries..............................................................................................................8
2.2.1 Large Scale and Small Scale Production Compared......................................................................9

2.3 Industrial Revolution........................................................................................................11 2.4 The objectives of industrial development in the current development.........................12 2.5 Favorable factors enhancing the economic development of small-scale industries.....13 2.6 Micro Finance and Small-Scale industries .....................................................................14 2.7 Somaliland Industrial Revolution....................................................................................15 2.8 Somaliland Current Industries........................................................................................15
2.8.1 Somaliland Small-Scale industries ..............................................................................................16 2.7.2 Importance of Small-Scale industries..........................................................................................16 2.8.3 Failed industries in Somaliland....................................................................................................20 2.8.4 Causes of failure in industries......................................................................................................21

Chapter three__________________________________________________________22 Methodology___________________________________________________________22 Chapter Four___________________________________________________________25 Data Presentation and Analysis____________________________________________25 CHAPTER FIVE_______________________________________________________41 CONCLUSIONS AND RECOMMENDATIONS_____________________________41
5.1 Conclusion .......................................................................................................................41 5-2Recommendation...............................................................................................................42

Bibliography ___________________________________________________________43 Appendix I_____________________________________________________________44

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Chapter One Introduction


In 1988 bloody civil war broke in former Somali republic between the government of Mohamed Siad Barre and Somali National Movement. In that decade of civil war, which erupted every side of life in northern regions of former Somali republic now Somaliland, has finally led the total collapse of Somali state in January 1991. After the collapse of the Somali state, Somaliland declared it independence. Although the country, Somaliland, is now peaceful and stable and has its own government, yet, much of the consequences of the war are still visible. The country has so far not been able to gain international recognition and this prevents it from obtaining international long-term investments or loans. To make the matter worse, livestock exports which has been the backbone of the economy for centuries no longer operates after the Saudi authorities whose country constituted the largest market for Somaliland livestock banned it on basis of suspected disease outbreak in Somaliland livestock in 1996. The war destroyed or seriously damaged every aspect of life. Economic and institutional infrastructures were destroyed, personal property and sources of income disappeared. The returnee population war traumatized, their homes were destroyed and the country was devoid of any kind of employment opportunities. Now the people of Somaliland are recovering form the war effects and trying to establish their economy on concrete pillars including industrial sector. The sector of industry, in the near future is expected to play a curtail role and contribute in the developing of Copyright All Rights Reserved to Mohamoud Abdi Hassan (tiger) (2)

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Somaliland economically and creating employment opportunities, because the industries like a fore mentioned factories can play a very important role in the economic growth, not only for employment opportunities but also for skills promotion and income generation as well. Therefore, it become necessary to establish national small industrial organization, which has the capacity to strengthen, direct, encourage, harmonize and promote privateowned industries and locally processed production of local Small-Scale industries in order to avoid overlapping and wasting our scarce resources.

Under these conditions small-scale industries in Somaliland and other business enterprises were revived initially by returnee which were within a short time of period impacted on all types of commercial transactions and production activities specifically related to basic human needs like shelter, food, clothes and household commodities etc. During the peaceful years in Somaliland the contribution of Small-Scale industries in Somaliland to the economic and social life of the country has been tremendous. The Small-Scale industries have participated the employment condition in the country; it has contributed to the retention of skills as well as skill creation and saved some of the countrys hard currency. In this my paper, I will examine the constraints of Small-Scale industries in Somaliland and impact of the nations economic as whole and the consequences of the problems associated with the breakdown of small-scale industries in the country. In this paper I will try to present in dept about the economic prospects of developing Small-Scale industries in Somaliland. First industry is a broad term for any kind of economic production, in economics and urban planning industry is a synonym for the secondary sector, which is type of economic activity involved in the manufacturing of raw materials in to goods and precuts. Industries in the sense of manufacturing became a key sector of production and labor in European and North America Countries during the industrial revolution. So, The developing industries in Somaliland is the only one which benefited the above

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.opportunities and it covered the needed for industries for the entire population of Somaliland and saved hard currency for the country that was being to spend the importation of industries form abroad countries. The purpose of the study is to better understand the current situation of the factor industries in Somaliland and their role of economy and to identify the existing industries and their locations in the country. It will also focus on their weaknesses, strengths and their capability in all aspects of economy, by examining their situation through identifying in case of major opportunities and obstacles that might encounter their economic influence. Generally, maturity of Somaliland industries is light industries and established during the past eight years. Somaliland industries produces different thing of materials such as: water bottling factors, hard soap and powder soap factors, bread, mattress, cushions, soft drinks and home furnishing materials.

1.2 Problem Statement


What is the main development in Somaliland Small-Scale industries? What are the main constraints in Somaliland Small-Scale industries? As mentioned above, this paper will focus on the small industry development and constraint. The purpose of the study is to better understand the current situation of the factor industries in Somaliland and their role of economy and to identify the existing industries and their locations in the country. It will also focus on their weaknesses, strengths and their capability in all aspects of economy, by examining their situation through identifying in case of major opportunities and obstacles that might encounter their economic influence. Generally, maturity of Somaliland industries is light industries and established during the past eight years.

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Somaliland industries produces different thing of materials such as: water bottling factors, hard soap and powder soap factors, bread, mattress, cushions, soft drinks and home furnishing materials. The development in Somaliland Small-Scale industries and constraint. The causes of constraint: Lack of capital investment. Shortage of skilled labor. Lack of banking system. Lack of technological support. Limited of government regulation. That is main constraint in small industry of Somaliland. Impact in Somaliland Small-Scale industries development: Direct contribution of the Small-Scale industries development to the economy are the full employment they provide the citizens ,the hard currency the save in the country, the tax the pay to the government and preliminary investment they made such as the land the buy, vehicles they hire and the buildings the build or rent Even though, there is no reliable source hard currency in the country, the breakdown of light industries can increase the trade imbalance of the country.

1.3 Purposes of the Paper


The main objectives of this study are as follows: To highlight the nature of small-scale industries To discover the causes of constraints. To know the role of the government to the small-scale industries. To study number of employees of small-scale industries. To study the skill of employees of small scale industries To study the investment policy in Somaliland. (5)

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Somaliland Small-Scale Industries Development And Constraints

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To study the market competition in small-scale industries To study economic impact of small-scale industries. In this my paper, I will examine the constraints of small-scale industries in Somaliland and impact of the nations economic as whole and the consequences of the problems associated with the breakdown of light industries in the country.

1.4 Structure of the Paper


The paper contains five chapters, which are as follow. Chapter one highlights introduction of the paper, background to the overall project, the statement of the problem, the aim of the research and the structure of the paper Chapter two literature review ,combines the information of Small-Scale industries, their background, development, constraints Chapter three is the methodology which mentions important things like the population, sampling, sample size, data collection methods, important assumptions as well as limitations of the study Chapter four is the analysis of the outcome of the study, the trend of responses and the weight of the sample. Chapter five draws conclusions and suggests recommendations based on its findings.

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Chapter 2 Literature Review


2.1 Definition of Industry:
Industry is the segment of economy concerned with production of goods. Industry began in its present form during the 1800s, aided by technological advances, and it has continued to develop to this day. Many "developed" countries (The U.S., the UK, and Canada) depend significantly on industry. Industries, the countries they reside in, and the economies of those countries are interlinked in a complex web that may be hard to understand at first glance. Industry in the second sense became a key sector of production in European and North American countries during the Industrial Revolution, which upset previous mercantile and feudal economies through many successive rapid advances in technology, such as the development of steam engines, power looms, and advances in large scale steel and coal production. Industrial countries then assumed a capitalist economic policy. Railroads and steam-powered ships began speedily establishing links with previously unreachable world markets, enabling private companies to develop to then-unheard of size and wealth. Manufacturing is a wealth producing sector in an economy. Following the Industrial Revolution, perhaps a third of the world's economic output is derived from manufacturing industriesmore than agriculture's share.

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Small Scale Industries may sound small but actually plays a very important part in the overall growth of an economy. Small Scale Industries can be characterized by the unique feature of labor intensiveness. The importance of this industry increases manifold due to the immense employment generating potential. The countries which are characterized by acute unemployment problem especially put emphasis on the model of Small Scale Industries. Small scale industries can be characterized with the special feature of adopting the labor intensive approach for commodity production. As these industries lack capital, so they utilize the labor power for the production of goods. The main advantage of such a process lies in the absorption of the surplus amount of labor in the economy that was not being absorbed by the large and capital intensive industries. This, in turn, helps the system in scaling down the extent of unemployment as well as poverty. It has been empirically proved all over the world that Small Scale Industries are adept in distributing national income in more efficient and equitable manner among the various participants in the process of good production than their medium or larger counterparts. Small Scale Industries help the economy in promoting balanced development of industries across all the regions of the economy. This industry helps the various sections of the society to hone their skills required for entrepreneurship. Small Scale Industries act as an essential medium for the efficient utilization of the skills as well as resources available locally

2.2 Types of industries


There are two main types of industries which are: I. Large-scale industry in general, heavy industry is viewed as more capital intensive, as requiring a larger fixed facility, and as having a larger environmental impact than light industry. Heavy industry can be also understood as that which produces products for other industries instead of end users. For example, steel mills or chemical plants are good examples of heavy industry facilities. Copyright All Rights Reserved to Mohamoud Abdi Hassan (tiger) (8)

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II. Small-scale industry is usually less capital intensive than heavy industry, and is more consumer-oriented than business-oriented (i.e., most of light industry products are produced for end users rather than as intermediates for use by other industries). Light industry facilities typically have less environmental impact than those associated with heavy industry, and zoning laws are more likely permit light industry near residential areas.11

2.2.1 Large Scale and Small Scale Production Compared


Modern times have witnessed a wonderfully rapid growth in the average size of the individual business. Indeed, the change in the size of the business unit during the past half-century is almost as striking as the change from house industry to factory industry in the second half of the eighteenth century. The movement has gone so far and is still proceeding so rapidly as to excite very general fear as to its social consequences. Certain dangers resulting from the consolidation of large competing corporations will be discussed elsewhere. But it is pertinent at this point, in connection with the subject of the organization of production, to advert briefly to the advantages claimed for large scale production and to the compensating advantages enjoyed by small scale producers. Advantages of Large Scale Production. The advantages claimed for production on a large scale resolve themselves into two general classes: (1) economies in making the goods, and (2) economies in marketing the goods. As to the first, it is claimed that in production on a large scale there is a saving in (a) capital cost, per unit of product, both in fixed and in circulating capital; in (5) labor cost, owing to the possibility of more efficient organization ; in (c) the possibility of making improvements, both through the employment of special investigators and inventors, and through the comparison of methods in different departments of the same factory or in the same departments of different factories under the same ownership; in (d) the cost of superintendence; in (e) the utilization of waste, as is instanced by the Standard Oil Company and the large beef and pork packing companies; in (f) providing their own aids to making and marketing making

Small industrial development organization (Sido) Article news

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their own cans, boxes, etc., and owning railways and steamship lines, etc. In businesses enjoying this last advantage, we sss Among the second class of advantages claimed for large scale production, economies in marketing the goods, are the following: (a) economy in securing trade, through advertising and commercial travelers; (6) economy in "carrying " stocks of goods, a relatively smaller stock being sufficient to meet the fluctuations in demand; (c) economy in getting goods to consumers, through the power to secure better freight rates for large shipments, and through the power possessed by some concerns to avoid "cross freights"; (d) economy in securing a foreign market, through the greater power of the large concern to withstand the cutthroat competition common in "hard times." The Strong Points of Small Scale Production. Against these alleged advantages of large scale production may be set the following considerations which seem to promise a continuation of a considerable measure of small scale production, at least in certain lines of industry: (a) First of all, it is claimed by experts that in many lines of business a plant of moderate size is the plant of really maximum efficiency in regard to capital and labor costs. (6) In many cases the advantage of the large scale business in the matter of concentration of power is neutralized by the fact that modern invention, especially in connection with electricity, is revolutionizing the methods of distribution of power, putting the small manufacturer on a level with his greater rival, (c) It is, furthermore, very doubtful whether large scale producers can secure that minute and economical supervision which characterizes small scale industry ; whether, in other words, hired managers can compete in this regard with individual entrepreneurs who will reap all gains as they bear all risks. (d) The small producer has a distinct advantage in his greater power to know the personal wants of his market. In many industries the personal element plays so large a part that the small producer will for a long time be able to hold his own, even if he cannot oust the large producer from the field. Finally, by cooperation of neighboring small producers, it is possible to secure much the same opportunities as to (e) invention and improvement of processes and (f) utilization of " waste " that we have spoken of as regularly inhering in large scale industry.2
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www.Economywatch.com/worldindustreis.com

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It must be borne in mind that our comparison has been between small scale and large scale production, not between small scale production and monopolized production. Monopolized production is usually, though by no means always, production on a large scale. But production on a large scale is not at all the same thing as monopolized production. Had we been speaking of the production of monopolized goods, it would have been possible to add many to the list of alleged advantages or economies in production, and some of the advantages of which we have spoken would in the case of a monopoly have been much more marked and undisputed. Thus in the matter of "cross freights" and again in the case of advertising, many would admit advantages in the case of a monopoly who would deny that they accrue simply to large scale production.

2.3 Industrial Revolution


The Industrial Revolution was a major shift of technological, socioeconomic, and cultural conditions in the mid 18th century and early 19th century. It began in Britain and spread throughout the world. During that time, an economy based on manual labor was replaced by one dominated by industry and the manufacture of machinery. It began with the mechanization of the textile industries, the development of iron-making techniques and the increased use of refined coal. Trade expansion was enabled by the introduction of canals, improved roads and railways. The introduction of steam power (fuelled primarily by coal) and powered machinery (mainly in textile manufacturing) underpinned the dramatic increases in production capacity. The development of all-metal machine tools in the first two decades of the 19th century facilitated the manufacture of more production machines for manufacturing in other industries.3 The effects spread throughout Western Europe and North America during the 19th century, eventually affecting most of the world. The impact of this change on society was enormous.

http://www.wikipedia.org

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The first Industrial Revolution merged into the Second Industrial Revolution around 1850, when technological and economic progress gained momentum with the development of steam-powered ships, railways, and later in the nineteenth century with the internal combustion engine and electrical power generation.

Industrial and society


An industrial society can be defined in many ways. Today, industry is an important part of most societies and nations. A government must have some kind of industrial policy, regulating industrial placement, industrial pollution, financing and industrial labor. Industrial labor In an industrial society, industry employs a major part of the population. This occurs typically in the manufacturing sector. A labor union is an organization of workers who have banded together to achieve common goals in key areas such as wages, hours, and working conditions, forming a cartel of labor. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labor contracts with employers.

2.4 The objectives of industrial development in the current development


1. Consolidation and maximization of efficiency and profitability of the existing large enterprises in the public sector. 2. Creation of new public sector industrial units in fields vital to the national economy. 3. Encouragement of foreign capital participation in setting up new projects in public or private sector or through join ventures.

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4. Encouragement and development of the private sector to enable it to grow and contribute to industrial growth. 5. Laying down appropriate principles of concentration and dispersion in location of new projects. 6. Consolidation and regrouping of small-scale industrial units and handicrafts into viable economic size in the form cooperation of support more sophisticated industrial development. 7. Continuous survey of industrial opportunities and preparation of feasibility studies for future industrial development of the country.

2.5 Favorable factors enhancing the economic development of small-scale industries


1. The economic development of small-scale industries was heavily influenced by seasonal factors. Since the second quarter, the small-scale industrial enterprises had entered into the production busy season, thus lots of small private businesses stopping production out of the influence of seasonal factors had restored their production. 2. As peoples living standard got enhanced step by step, the consuming demand was enlarged unceasingly, thus industries closely related with peoples daily life such as food processing and bean products processing were with an obvious growth tendency. Therefore, enterprises and individuals involving in them all had achieved good production benefits. 3. In the second quarter, the construction material industry entered into the production and marketing busy season. The construction material production and other relevant industries developed with a high speed. Lots of construction material industries such as the cement and its relevant products, prefabricated parts, brick and tile manufacture, sand mining developed well. 4. The manufacture enterprises such as wood processing, furniture manufacture, door and window manufacturing and general-purpose equipment/universal equipment maintained sound development momentum, including the manufacturing such as mechanical Copyright All Rights Reserved to Mohamoud Abdi Hassan (tiger) (13)

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workout, pressing and handcrafts as well as individual industrial sectors such as the wood material processing, wood, bamboo, and cane and palm fiber processing sectors.4

2.6 Micro Finance and Small-Scale industries


Small-scale enterprises plant, purchase and process inputs, innovate, improve their productivity and modernize constantly. Their financial needs involve various microfinance services: short-term loans to finance inputs such as fertilizers and labour, storage and processing of products; medium- and long-term loans, equity finance and leasing for equipment and seedlings; savings to smoothen consumption and uneven cash flows, and to build assets to cover investment needs; insurance to protect their crops and insure loan repayment; and payment services. Most small-scale enterprises operate their forest-based activities jointly with other processing, service or agricultural activities, so they seldom occur as separate enterprises.
Limited access to microfinance services is a constraint to the development of small-scale enterprises. The riskier nature of their activities and the fact that they are generally located in areas of remote access make it particularly challenging and costly for microfinance institutions to reach out to them. Nonetheless, governments should restrain themselves from imposing ceilings on interest rates that limit the ability of microfinance institutions to attain viability and provide permanent access to their services to an increasing number of households. Subsidized targeted credit programs, most often beset by poor loan collection rates, undermine the development of sustainable microfinance and distort the market. Rural institutions should not be forced to provide substandard financing products for smaller enterprises or to risk worsening their portfolio quality by imposing mandatory forest lending quotas. Sound financial procedures, cost-recovering rates and management autonomy of microfinance institutions should be respected. Several government interventions can help microfinance services reach small-scale enterprises. These include establishing a policy framework and financial infrastructure conducive to microfinance, providing business development and market infrastructure in support of production, strengthening the economic potential of small enterprises and enhancing the capacity of microfinance institutions to serve them.

www.scripd.com/small-scaleidustries.com/economywatch.com

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2.7 Somaliland Industrial Revolution


When the industrial revolution began in Europe, they were much a like the recent Africans. The European people were a primitive, a poor communities and un employed. But eighteen century when the revolutionary exploded in Europe, they quickly their week economy, began to develop their countries and elect the selves as super power nation. All this changes come after they build industries and these industries contributed much to their economics. After that time many nations flew the foot steps of European countries they began industrialize their countries and this idea brought them sensible development. In Somaliland, the revolution of industrialization began in the latest years of twenty century and now Somaliland is the first face of the introduction of industrialization. Majority of the industries have been established in the capital city of Hargiesa, but few and important ones are togdher region (burco). The most of industries are light industries in weight but they have variety of product which is sufficient in local market. These home made products are foam, plastic, leather, juice, fiberglass, meat, chalk, bottled water and etc

2.8 Somaliland Current Industries


Since the beginning of the peaceful years in Somaliland, forty two industries hwere established in Somaliland as registers Somaliland industries association, mainly invested by Somalilands Diaspora and local business people, most of these industries are light industries, only two industries can be considered as heavy industries, Ileys detergent and Hargeisa wheat flour are those who are heavy industries.5 In the beginning period of establishing industries in Somaliland a lot of problems has faced from the government, the importers and the local people which prefer local products to the foreign product.

Source: Somaliland Industry Association

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2.8.1 Somaliland Small-Scale industries


About 95% of Somaliland industries are Small-Scale industries, these industries produces products related to human needs like, drinks, bakery, sweets, shoes, meat and fish. The Small-Scale industries in Somaliland are nearly successful, although there are industries which fully dominated the market like the foam manufacturing industries and spring water factories.

2.7.2 Importance of Small-Scale industries


The role of Small-Scale industries development of a country can play an important role in the process of a countrys industrial and economic development. In particular, small and medium scale industries (SMIs) can make significant contribution to achieve social and economic objectives such as; labor absorption, income distribution, rural development, poverty eradication and balanced economic growth Industries in Somaliland are mostly small sized industries which can provide their products to Somaliland and rarely in the neighboring countries, but there are two heavy industries which are so important to Somaliland and can offer hundreds of jobs to local employees. Ileys detergent, this industry was established march 2006 in Burao, it is the first of its kind to be build in Somaliland, hundreds of investors joined to build this industry, about 10 million US dollars were spend during the commissioning. According their productivity this industry can produce 120 tons of detergent daily if it works fully, bur now it produces 60 tons of detergent. This industry can provide 70% of its products to the neighboring markets in Ethiopia, Somalia and Djibouti, but this industries faced a marketing problem which is still going on, because a same products are still importing from Yemen and the government of Somaliland does put a higher tax rate on the foreign products, this foreign product can

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breakdown the productivity of the local industries, other problem is joining markets in neighboring countries like Somalia which a chaotic area and Ethiopia which did not open the doors of its market to Somaliland products.6 The other important industry is Hargeisa wheat flour, and participated the rich market of its products in Somaliland, it provided a good quality product to the market, but this industry existed a short period due to a challenges and other problems which led the breakdown of its production and finally moved to Ethiopia where it get a facilities which they cant get in Somaliland These and other industries can change the employment condition of Somaliland and save a hard currency if they successfully run and get their facilities.

Industrial and society


An industrial society can be defined in many ways. Today, industry is an important part of most societies and nations. A government must have some kind of industrial policy, regulating industrial placement, industrial pollution, financing and industrial labor.

Industrial labor
In an industrial society, industry employs a major part of the population. This occurs typically in the manufacturing sector. A labor union is an organization of workers who have banded together to achieve common goals in key areas such as wages, hours, and working conditions, forming a cartel of labor. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labor contracts with employers.

Somaliland industrial production

Source: Somaliland Industry Association

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Somaliland industry has been fully influenced by the socio culture. The mentality of pastoralists is always there it is not also far from other cultural influences. First of all the industry is established without feasibility study. The technology is not selected by the establishing members spares/ Raw material supply assurance needs acceptable competitive price is not there selection of site for suitability and cost price reduction is not there. They did not take any consultancy for the establishment of that industry besides this there is no legally well dedicated memorandum and articles of association as well as internal regulations as an regulatory France work, control and smooth functionary of the entity in a transparent and accountable manner what also is missing is the base of production which is totally unknown in this country culturally including maintenance and over handing strategies. This sector is the base of the success of any productive entity, economically, politically, and administratively to be in concise. The majority of those in the industry lack The know of the sector even the area they are in for business. The technology and markets involved The management and its evaluation and control The lack of the strategy of planning marketing that needs to be based locally, regionally and globally.7 All these factors and many others make the industrial production in Somaliland a burden and un successful. The public sector of the development of an industry for certain political reason for example; to produce affordable production for its local population or to produce high quality immersive production for export to carry a hard currency where have mainly the raw material is ever 70% local to introduce certain technology in the country for the welfare of its people. The many factors and critters for establishment of an industry we are not courage able . Adequate knowledge of industrialization is ministry.

Source: UNITED NATIONI IDUSTRIAL DEVELOPMENT ORGANISATION (article)

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Human resource are 97% not available and even are not viable to be prepared for the coming future needs. Financial reasoning there are no investment and commercial bank in Somaliland that an industry is dependant to in any country. Poor and weak purchasing power where 10% of the local population are living less then 2 US per family per day, there fore low consumption. Lack of foreign market penetration due to market conservation of the developed countries though certain products we allowed under trade agreement term between governments specially developed and underdeveloped. Active Small-Scale industries in Somaliland 1. Togdheer Mineral Water 2. Saafi Minerla Water 3. Hargeisa Spring Water 4. Ilays Detergent Industry 5. Hargeisa Plastic factory 6. All Khayraad Foam Factory 7. Foster Sam Sam Factory 8. BerrBara Tanney 9. Hargeisa Food and Beverage Industry 10. Raaho Foam Factory 11. Safa Food Factory 12. Gamuur Fiber Class Factory 13. jerinimo Factory 14. Golis Water Factory 15. Shifo Bure Natural Recourse 16. Hides and Skin Factory 17. Shamis Mineral Water 18. Togdher Union Electric 19. AllBaraka Natural Water 20. Hoodo Plastic Factory

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21. Xareeda Mineral Water 22. Nadalo Food Processing Factory 23. Almis Conventional 24. United Basic Industries 25. Afgal Food Industry 26. Shaam Food Factory 27. Batuun Leather Taning 28. BerBera Fisher Glass 29. DurDur Factory 30. SaxanSaxo Factory 31. Indhadeero Soap Industry 32. Ilays Elecric Industry 33. Som/tires Factory 34. Marble Granite Factory

2.8.3 Failed industries in Somaliland


The failed industries of Somaliland or those who stopped work are much higher than those who are currently working, about 61% of all industries in Somaliland have failed or nearly failed and not working other 39% are only current working. Those industries are failed or stopped working. 1- Hamdi shoes factory 2- Hargeisa sweets factory 3- Raasamal roofing and tiles 4- Nails factory 5- Lasqoray fish canning 6- Hargeisa oxygen factory 7- Nikol fish processing factory 8- Gummite marine products 9- Haybe edible oil 10- Emulsion and paints factory Copyright All Rights Reserved to Mohamoud Abdi Hassan (tiger) (20)

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2.8.4 Causes of failure in industries


There are many possible cause of failure at the sides of the government, importers and consumers. The impact of industry failure can cause damage businesses, and its consequence can affect the future investment of the industrial sector. Here are the main factors that cause the failure of small-scale industries: 1. Lack of fund and difficulties in financing. Lack of fund and difficulties in financing had become the main development constraint factors for most enterprises. There were several key reasons that caused difficulty in financing: First, the medium and small scale enterprises were usually with small size and low credibility; secondly, lack of loans providers, specially, for those privately-owned small industrial and commercial businesses. 2. Shortage of skilled labor The labor is the most important factor of production so it has its consideration and importance. For this reason its availability is simple in Somaliland for this time, but the question is, are they the right ones those fit the production lines? In Somaliland the skilled labor is limited because of the civil wars, the vocational schools either destroyed or not functioning properly. Although there is unemployment in the country the greatest problem is due to shortage of skilled labor that sabotaged the economic growth of society which in turn has a bad effect the wellbeing of the citizens. 3. Lack of information and blindness in investment Generally speaking, the small-scale industrial enterprises were with small production scale and dispersive location as well as lacking a consummate information exchange
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International Labor Organization (news artcle)

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platform. The information occlusion made some enterprises pursue the market trend blindly and lacked rationality in their investment, which led to the lack of market competence and the development potential. 4. Shortage of Technological Development There are several branches of technology and engineering specialized for industrial application. This includes mathematical models; patented inventions and craft skill see automation industrial architecture industrial design, industrial process, industrial arts and industrial applicability, all of these technological development they are not exist in
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Somaliland.

5. Absence of banking role Absence of banking system in Somaliland in of the causes of obstacles most of the surveyed industries are complaining about the deficiency of effective banking system in Somaliland. For example a result show that lack of banking system is 30% of major impediments facing small-scale industries in Somaliland. Therefore the banking role is can play a major role of failing industries and also succeeding industries, as the respondents indicated 20% of them states that insufficient capital is cause of the failure of industries, so if effective banking system is available in Somaliland they would give loans to avoid capital shortage

Chapter three Methodology


9

Case Study of student-online electronic books

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Somaliland Small-Scale Industries Development And Constraints

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3.1 Date Collection Methods The Research methodology that was used to accomplish this paper was interviews which was gathered from people well-informed about the failure of industries, the tool was questionnaire which was developed to gather information from randomly selected population The primary data are the results of the interviews and questionnaires. The secondary data are the current information about the definition of small-scale industries and their development and constraints, its related literature review.

3.2

Sampling

The subjects of this research are small-scale industries based Hargeisa, in this study I selected sample ten industry owners and managers mostly faced decline and growth situation of their business as probability and non-probability convenience sampling. These industrialists will respond to survey questionnaires distributed. These survey questionnaires are closed-ended questions asking about impeding factors for their industries. In this study the

3.3

Limitation of study

Limitation of the study can be from different source. For example the written scarcity of written document about Literature Review the industries of Somaliland has became limitation to my research. Due to this limitation and other constraint, this paper several other limitations.

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Another limitation is, most of the interviewed were reluctant to share information. 3.4 Limitations of the Data Study As we know, every research has its limitations that do not allow the researcher to perform the research as accurately as needed, like other studies, the research limitations are the following: i ii iii vi Distributing and collecting data Taking regular courses of university Time Cost

The major limitations of this research paper were cost, time and collecting data. Time The time of this research paper was short and it is possible to have much time as well as resources to conduct enough as needed in the. The people involved when doing the research were sensitive to this investigation of research. Cost Cost was also a inevitable limitation that faced to this research because of the various stages of the study. It needed same costly items including out relevant information from the written books, electronic communications, printing the research paper and photocopying of the preparing of this paper.

Difficulty in collecting Data Another main limitation which is associated with this research paper was the difficult of the research like questionnaire and performing the analyze.

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Somaliland Small-Scale Industries Development And Constraints

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Same of the organization, I distributing the questionnaire have different departments and section and I found it difficult and confused which section is fit for the questioner to be handed and this has lost more extra cost and time. The most problems that I met during the contributions of the questionnaire and collecting data were, the managers of the companies or human resource department could not be seen first and it was also difficult to collect easily or quickly because very manager was busy and did not try to respond as soon as you. Some times some of the managers lost the questionnaire papers. The greatest problem that I met was lack of technical equipment like computer and printer.

Chapter Four
Data Presentation and Analysis

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This chapter shows the analysis of the research paper; it interprets the data contained by the questionnaire, which was the primary data of the research. The questionnaire contained about twenty-two questions, which we will analyze each one to provide a detailed analysis about the information gathered. The first question was about ages of the owner of the companies the research has found that ages of 10% the managers of small scale industries is between 20 25 years old, while 60% of the of them aged 36 -50 years old, and finally 30% of the managers interviewed aged above 50 years. This means that most of managers aged 36 50 years.

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See figure 1

F IGU R E 1
60%

30%

10%

20 - 35

36-50

a b ove 50

The second question was about the gender of managers. The study has found that 90% of the total respondents were males while 10% were females. This means most of managers of small scale industries are male because its a hard job, it needs many hours to be worked. See figure 2
F U E2 IG R
10 %

m le a fe a m le

9 0%

The third question was about the educational qualification of the managers.

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Somaliland Small-Scale Industries Development And Constraints

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The study has found there were no managers in which their educational qualification is Elementary, while 40% of the respondents were Secondary school graduates, at the same time 40% of the respondents were Bachelor degree holders, while 10% were Master & PhD holders, finally another 10% of the respondents indicated Others, including technical institute, mechanical, etc. For further clarification please look figure 3
10% 10% 40% 0% elemantary secondary Bachelor Master & PhD Others 40%

The fourth question was about the kind of the organization. The study has discovered that 20% of the organizations interviewed were service industries, there were no merchandizing industries, 70% of the industries interviewed were manufacturing industries, finally 10% of the industries matched all categories including service, and manufacturing. This shows us that the small scale manufacturing industries are increasing in our country. See figure 4

FIGURE 4
100% 50% 0% 20% 0% 70% 10%

Service

Marchendising manufacturing

All

The Fifth question was about the legal organization of the industry.

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The study has found out that 20% of the respondents were sole proprietorship industries, while 70% of the respondents were partnership industries, finally 10% of the respondents indicated that the legal type of their industries is corporation, this means that the most of small scale industries in our country are partnership which means many shareholders formed it. See figure 5.
FIG R 5 U E
70%

20% 10% 0%

So p p le ro riato r

P artn ersh ip

C rp ratio o o n

O ers th

The Sixth question was about number of employees work in this small-scale industries in the country. The study has shown that 40% of the respondents described that 10 20 employees work their industries, while 30% of the respondents showed that 21 30 employees work their industries and finally 30% of the respondents indicated that more than 30 employees work their industries permanently. This shows us that small size of labor force work in the industries in our country, some of the managers indicated that they can increase the number of employees work in their industries but the main constraint is lack of enough investment, and that is why they cant fully utilize their resources. See the table below. Q# 6 Question Choice Number of Employee works in your 10 20 industry 21 30 Above 30 Total The seventh question was about who manages the industry. The study has found out that 15% of the respondents is managed by hired managers, while 55% of the respondents showed that partners manage their industries and finally Copyright All Rights Reserved to Mohamoud Abdi Hassan (tiger) (29) Frequency 4 3 3 Percentage 40% 30% 30%

Somaliland Small-Scale Industries Development And Constraints

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30% of the respondents expressed that individual owners manager their own industries. This shows us that small scale industries in our country needs to hire expert managers who can lead more profits and can survive the company many obstacles which can result to bankruptcy. Lack of hired expert managers is one the main obstacles which led many small scale industries opened in our country to shutdown after very short period. See figure 7
F U E7 IG R
H ired m anagers P atrners Invididual ow ners Invididu ow al ners

1 5% 5 5% 30 %
P atrners H ired m anagers

The Eight question was about who manages the industry. The study has found out that 30% of the respondents started their industries with limited capital between $10,000 - $20,000, while 60% of the respondents started their industries with an amount of capital between $20,000 - $30,000, finally 10% of the respondents mentioned that they initial capital was estimated amount of money between $40,000 $50,000 dollars. The study has clarified one big constraint which emerges when investing small industry and it is very limited initial capital, because if they were having more capital, they could invest bigger industry. See this table. Q# 8 Question Your Initial Capital was Choice $10,000 - $20,000 $20,000 - 30, 000 $ 40,000 - $50, 000 Total The Nine questions were about does your organization get any Support from the government at the initial time? Frequency 3 6 1 Percentage 30% 60% 10%

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The study has found out that 90% of the respondents indicated that they didnt get any support from the government of Somaliland, one the managers described that the government it self is an obstacle for their industries because we import essential inputs so the government allows not to impose a tax for the first five years of the industrys life, but should be very good if they make it free of charge in order to produce cheap products, but when they impose it a tax, the finished goods we produce becomes higher than the foreign goods, the government didnt restrict the traders who import the products in which our industries produces, and that results hazardous challenges which finally results the bankruptcy of the local industries. In the other hand 10% of the respondents mentioned that they receive supports from the government include, free registration of the government, low cost trading license, sometimes they receive land to build the industry. Most of the managers described that they need more support than the current from the government. The tenth question was about your yearly Income is estimated to be? Q# 10 Question Your yearly income Choice $10,000 - $20,000 $20,000 - 30, 000 Above- $50, 000 Total Frequency 7 2 1 Percentage 70% 20% 10%

The study has discovered that 70% of the respondents earn an estimated yearly income between $10,000 - $20,000, while 20% of them mentioned an average income of $20,000 - $30,000, and finally 10% of the respondents described that yearly income they receive is above $50,000. this question has discovered the yearly income or the revenue in which small industries generate whole the year is too low, this point resulted that most of the wealthy people in Somaliland discourage investing small-scale industries.

The eleventh question was about where do you obtain the raw materials used for production? (31)

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Somaliland Small-Scale Industries Development And Constraints

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The study has discovered that 10% of the respondents indicated that they receive their raw materials in Somaliland, while 60% of them indicated that they import the raw materials they use from abroad, finally 30% of them mentioned that they receive the raw materials they use from both domestic and foreign markets. See figure 11
FIGURE-11

30%

10%
Local Abroad Both

60%

The twelve questions were about, If the raw materials are not available in the Somaliland, do you think it is an obstacle to your production?

The study has discovered that 90% of the respondents mentioned that it is big obstacle since the raw materials their industries uses is not available in Somaliland, while 10% of them indicated that they mentioned that it is not big threat if they didnt find raw materials in the country. This result shows us that one of the biggest challenges which faces the small-scale industries is lacking raw materials in the country, because they FIGURE-9 FIGURE 12 import raw materials, it costs higher cost which results to produce high price finished goods, then the people prefer to buy foreign products instead of locally produced products, because consumers always mention since there is no difference in the cost of 100 the two products, the imported foreign products are better than domestically produces ones, so will prefer the foreign products, finally this increases the possibility of
60 bankruptcy. See figure 12 40 20 0 Yes No Yes No 80

90

10

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The thirteenth question regarding your Industrys product, how many competitors do you face in your markets? The research has found out that all small-scale industries face competition in their market, 20% of small-scale industries described that they face their market a number of competitors which is less than 10, while 50% of the competitors indicated that they face their market more than 10 competitors, finally 20% of respondents indicated that they dont know the number of competitors they share same market. This shows us that establishing same small-scale industries which produces same produces is a big threat which can contribute the bankruptcy of the small-scale industries. See figure 13.

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FIG URE-13

50% 0%
No Com petition

20%
Few than 10 er More than 10
Fewer than 10 D ont know

20%
Dont know

N C o ompetition More than 10

The fourteenth question asked According to the existing competition, your organization is? The study has ascertained that 30% of the respondents are competition leaders, while 40% of small-scale industries are followers, 20% of them are challengers, and finally 10% are niche which means they are struggling to stick their position. See figure 14
FG R - 4 I U E1
4% 5 4% 0 3% 5 3% 0 2% 5 2% 0 1% 5 1% 0 5 % 0 % 4% 0

3% 0
2% 0 1% 0

La e e dr F llo e o wr Ca n e h lle g r Nh ic e

La e e dr

F llo e o wr

Ca n e h lle g r

Nh ic e

The Fifteenth question asked Current situation of industry: The study showed that 35% of the small-scale industries are in critical condition which means they are struggling to survive or we can simply say they are in Break Even Point, no profit, they cover their variable cost only, while 5% of the small-scale industries are stagnant, they didnt make any improvement also didnt decline, while 15% of them are making a decline, they are not willing to exist the coming years, finally 45% of smallscale industries are making growing, the most of this group are newly established (34)

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Somaliland Small-Scale Industries Development And Constraints

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industries at the same they receive most of their inputs in the local with cheap price, some of them are bottled water industries, bakeries, electricity etc. see figure 15.
FIGURE 15

35% 15% 5%

45%

Critical: Struggling to survive

Stagnant

Decline

Growth

The Sixteenth question was In general, interpretations of regulations affecting my firm are consistent and predictable. The study has discovered 10% of the respondents fully agreed that interpretations of regulations affecting their firms are consistent and predictable, while 20% of them also agreed, in the other hand 30% disagreed that interpretations of regulations affect their firms also another 40% of the respondents fully disagreed that interpretation of regulation has an effect in their firms. See figure 16

FIGURE 16
40%

30% 20% 10%

Fully Agree

Agree

Disagree

Fully Disagree

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The Seventeenth question asked was the following regulations have been serious barriers to run my Industry: The Study has discovered that 20% of the respondents underlined when obtaining business license is serious barrier to many new small-scale industries, 15% of the smallscale industries highlighted that labor regulations is a serious threat to their industries, 40% of the respondents mentioned that taxation regulation from the government is a serious threat to their industries and finally 30% of the respondents indicated that National Trade Policy is a constraint to the existence of their industries. Therefore the government should try to lighten these threats to survive many struggling small-scale industries. See figure 17
FIG R 17 U E
Business Licensing, 20% Taxation regulations, 40% Labor regulations, 15%

N ational Trade Policy, 30%

The eighteenth question asked was the tax paid to government by your organization is logical and affordable The study has discovered that 10% of the small-scale industries fully agreed that it is logic and affordable the tax they paid to the government, while 20% of them agreed that it is somehow logic and affordable tax, while 30% of small-scale industries disagreed and described that they couldnt affordable to pay the tax they paid to the government, another 40% of them fully disagreed that it is totally a burden and an obstacle the tax they Copyright All Rights Reserved to Mohamoud Abdi Hassan (tiger) (36)

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paid to the government. This shows us that the government has imposed a heavy tax on small-scale industries; one of the managers sampled mentioned that the government makes input tax, sales tax and also profit tax, he mentioned that it is unaffordable to pay all these taxes since they generate small amount of revenue. See figure 18 FIGURE 18
30% 40%

20%

10%

Fully agree

Agree

Disagree

Fully disagree

The nineteenth question was Does your organization get any subsidiary from the government? The study has discovered that there is no single small-scale industry which gets any subsidiary from the government at all; all small-scale industries sampled confirmed that the government didnt plan any amount of its budget to give the small-scale industries as a subsidiary. They confirmed that if the government gives the small-scale industries a subsidy, many investors would get an encouragement of investing small and medium scale industries. See figure 19

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F U E1 IG R 9
10 2% 10 0% 8% 0 6% 0 4% 0 2% 0 0 %

100 %

0 % Ys e N o

Question Twentieth what are the obstacles that face your industry? The study has discovered that 10% of the respondents mentioned that unskilled labor is the biggest obstacle which faces their industries, while 15% of the respondents mentioned the most hazardous obstacles which faces is lack of advanced technology, 20% of them are suffering from lack of micro finance {capital mismanagement}, another 20% of them are suffering competition of imported products, 10% of the respondents described that they are suffering from insufficient capital, and finally 25% of the respondents underlined that their biggest threat is the legal constraints. This shows us that the small scale industries in our country is faced on many challenges and threat which needs to be solved, because the above mentioned challenges weakened their production and also caused the bankruptcy of many small scaled industries previously opened in Somaliland, if it is not solved together, it will also result the many other small-scale industries which operates now to close its doors. See figure 20

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FIGURE 20
Unskille d la bor, 10% Legal constraints, 25% Lack of adva nced te chnology, 15%

Unskille d labor Lack of a dva nce d te chnology Lack of m icro fina nce Com pe tition of im porte d products insufficient capita l Lack of m icro fina nce , 20% Legal constra ints

insufficie nt ca pital, 10% Com petition of importe d products, 20%

The Twenty First was does the government of Somaliland is doing well to remove these barriers. The study has confirmed that 30% of the respondents agreed that the government is doing well to remove the barriers opposing the small-scale industries, while 70% of the respondents disagreed that the government is not doing its best to remove the barriers opposing them, one of the managers said the government is completely unaware the Challenges and opportunities of the government so how it can solve the constraints we are suffering from, he mentioned that Ministry of Industries didnt serve the interest and the development of the small-scale industries. See this information in graphically please look at figure 21.

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FIGURE 21

70% 30%

Agree Dis-Agree

Agree

Dis-Agree

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CHAPTER FIVE CONCLUSIONS AND RECOMMENDATIONS


5.1 Conclusion
1- At least ten of the selected small-scale industries were owned by group of Somaliland partners. 2- All the small-scale industries were supported by the Somaliland government through tax exemption for their row material product exported from the out side of the country. 3- All the small-scale industries had same challenges facing their operations and they are Competition between local and foreign product Lack of good marketing Lack of good infrastructure Shortage of skilled labor Obstacles in exporting Lack of banking system Lack of micro finance 4- All the product of these small-scale industries were consumed locally ,but recently some of the began or preparing to export 5- Most of small-scale industries had visible contribution to the economy at side of Employment, Exports, Rents, Tax, leases and private contribution and charity. 6- All the small-scale industries had take part the contribution of the reconstruction Absence of banking system in Somaliland is the main causes of failures. Most of the surveyed industries are complaining about the deficiency of effective banking system in Somaliland. For example a result show that lack of banking system is 30% of major impediments facing smallscale industries in Somaliland. Therefore the banking role is can play a major role of failing industries and also succeeding industries, as the respondents indicated 20% of them states that insufficient capital is cause of the failure of industries, so if effective banking system is available in Somaliland they would give loans to avoid capital shortage. The skills of the labor is important, we can say unskillful labor have effected the industries as above mentioned factors affected, as the result of the respondent stated the unskilled labor affects the industries in someway

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The research discovered small-scale industries are in critical condition which means they are struggling to survive or we can simply say they are in Break Even Point, no profit, they cover their variable cost only, while 5% of the small-scale industries are stagnant, they didnt make any improvement also didnt decline, while 15% of them are making a decline, they are not willing to exist the coming years, finally 45% of small-scale industries are making growing, the most of this group are newly established industries at the same they receive most of their inputs in the local with cheap price, some of them are bottled water industries, bakeries, electricity etc. .

5-2Recommendation
Suggestion of this research is made according to the supposed causes of industrial failure. To begin with, recommendations with to regard of failure of industries are presented in following points. Many small-scale industries in Somaliland are established with inadequate finance which may result a decline of the industry. In order to protect failure caused by financial problem, loans from the banks and other credit institution can cover their need of sufficient capital. Somaliland industries would like to provide their products in a reliable market, but the foreign product takes a big share of the market. Although Somaliland is free market economy. However, is too good to the for local product if the government interfere the foreign goods by imposing on a high taxes. Small-scale Industries need skilled and effective labor which can produce a dependable product. To improve the knowledge and skill of small-scale industries employees through variety of training. Establish industrial zone for all Somaliland cities to create the government. Strengthening government coordination and small-scale industries. Government should reduce the tax Finally the certainty of the local customers is important point. Many customers prefer the foreign manufactured goods instead of consuming local products.

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Bibliography
1- Small industrial development organization (Sido) Article news 2-www.Economywatch.com/worldindustreis.com 3-http://www.wikipedia.org 4- www.scripd.com/small-scaleidustries.com/economywatch.com 5- Source: Somaliland Industry Association 6- Source: Somaliland Industry Association 7-Source: UNITED NATIONIIDUSTRIAL DEVELOPMENT ORGANISATION 8-International Labor Organization (news articles) 9-Case Study of student-online electronic books/wkipedia.org 10. Gamuur Fiber Class industry 11.Foster SamSam 12. All Khayraad Foam Factory

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Appendix I
University of Hargeisa
Thesis questionnaire Cover letter
Dear respondent

I am attending the faculty of economic and political science at university of Hargeisa for May final research paper, currently I am carrying out a survey to find out

Somaliland Small-Scale Industries Development and Constraints


We will strictly keep the confidentiality of your responses, only the researcher will access it, the information you gave us will be generalized. The survey would take you no longer than 15-20 minutes to complete. I would ask you to complete every question and most questions can be answered with a tick, but there are also opportunities for you to add your own comments. Data collected in this survey is for academic purpose only. I sure you that your views will be treated in the strictest confidence and no personal identifying information will be passed back to your company. Your response could be a significant contribution to my research findings. Thank you in advance

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MAHAMOUD ABDI HASSAN Tel : 4422059 Email: m_tiger2@hotmail.com ,telesomsites@gmail.com

UNIVERSITY OF HARGEISA

QUESTIONNAIRE
Research Topic: Somaliland Small-scale industries development and constraints

Survey Questionnaire

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INSTRUCTIONS: Please answer all questions. For multiple choice questions please tick the box that corresponds with your response. For the remaining questions, please FILL IN the blanks as indicated. Enterprise information Entrepreneur Name 1. Owner: 2 Age 20-35 36-50 above 50 Gender Male Female Education Primary 2. Kind of organization y Service Secondar Bachelor Manufacturer other above 30 Hired Managers 30,000-40,000 above50,000 Masters & PHD Others

Merchandise 3. What is the legal organization of this Industry? Sole proprietorship Partnership Corporation 4. Number of Employees 10-20 21-30

5. Who manage your Industry? Individual owner(s) partners 6. Your Initial Capital was? 10,000-20,000 20,000-30,000

7. Does your organization get any Support from the government at the initial time? Yes No 8. Your yearly Income is estimated to be? Less than 5000-10,000 11,000-50,000 5000 9. What kind of products does your industry produce? Consuming Commercial Industrial goods goods goods 1 Where do you obtain the raw materials used for production? 0. Local Abroad Both above50,000 others

1 If the raw materials are not available in the Somaliland, do you think it is an obstacle to 1. your production? Yes No 1 Regarding your Industrys product, how many competitors do you face in your markets? 2. No Competition More then 10 Fewer than 10 Dont know

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