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The people of the self-proclaimed nation of Somaliland draped themselves in every variation of their national flag as they attended their Independence Day parade on May 18 in their capital, Hargeisa.Geoff York/The Globe and Mail

As the crowd chants, "Give us recognition!" the world's most quixotic Independence Day parade marches through the dusty streets of Hargeisa. There are gymnasts and circus performers, flag-festooned camels, mounted police on colourfully tasselled horses, a convoy of rocket launchers and red-bereted soldiers with old rifles and Kalashnikovs.

The spectators roar. Women ululate. Marshals use sticks and whips to beat back the surging crowds. The parade marches on: firefighters in helmets, livestock herders, industrial trucks piled high with bags of detergent and even a float from the state water monopoly, proudly displaying a functioning shower. An elderly lion, chained in a truck, is draped in the Somaliland flag.

For all the spectacle of its annual celebrations, this self-declared sovereign state in the deserts of northwestern Somalia is no closer than ever to its dream of global recognition. Foreign diplomats typically refuse to attend the annual independence day parade. But Somaliland's achievements cannot be ignored by anyone who wonders how to build peace and democracy in the world's most forsaken corners.

Somaliland has emerged as an oasis of stability and democracy in one of the most volatile and violent regions in Africa. With five consecutive elections monitored by independent observers over the past 12 years, it has managed to create the freest economic and political systems in the Horn of Africa.

To do so, it has overcome obstacles that might seem insurmountable: poverty, isolation, civil war, high levels of illiteracy, severe shortages of natural resources and, most notably, almost no bilateral foreign aid. Somaliland's success is so remarkable that scholars, including such global figures as U.S. political scientist Francis Fukuyama, have been wondering whether it might actually be a result of the lack of aid.

Most countries officially consider Somaliland a region under the formal authority of Mogadishu, the capital of Somalia – even though Mogadishu and the rest of southern Somalia have been consumed by war and chaos for the past two decades. Because its independence is unrecognized, Somaliland's government does not receive any direct bilateral aid from foreign donors (although it receives some private aid).

"With no foreign assistance, the Somaliland government did not have an independent revenue base, making it dependent upon the continued support of its constituents," Nicholas Eubank, a Stanford University researcher, wrote in a 2010 working paper subtitled "Lessons from Somaliland."

Somaliland's government survives on taxation revenue, which, in turn, requires a degree of political accountability and transparency. In contrast, there are 16 countries in sub-Saharan Africa where foreign aid is so massive that it equals more than half of government spending.

"If these aid levels damage the quality of governance in recipient countries – as Somaliland's experience suggests they may – then it might be the case that, in the long run, less money may actually do more good," Mr. Eubank wrote in a blog post.

Somalilanders agree with the scholars: The lack of aid is an advantage in many ways. It has helped bring economic resilience and peaceful elections to resolve disputes. And its institutions are forced to be democratic and inclusive, because otherwise the government would have no hope of coaxing taxes from citizens and the business community.

Somaliland reasserted its independence this week when it refused to take part in a European Union conference in Brussels on the future of Somalia – even though the EU countries were offering $2.4-billion in new aid to Mogadishu.

"Somaliland lacks the 'dependency syndrome' that many African nations suffer from as a result of the never-ending foreign aid infusion," says Moustapha Osman Guelleh, an entrepreneur who opened a $20-million Coca-Cola bottling plant in Somaliland last year.

From war to peace

Two decades ago, Somaliland's major cities were lying in ruins, destroyed by years of civil war and aerial bombardment by the regime of dictator Mohamed Siad Barre. Its victorious rebel forces were fractious and prone to violent feuding. Yet within a few years it had forged new democratic institutions for its 3.5 million people.

"If you wait for someone else to pull you up, you'll have to wait forever," says Shukri Ismail, a former Somaliland election commissioner and founder of a non-profit health and education organization here.

"We started from nothing. We relied on ourselves, and everyone became involved in peace-building."

All of this was accomplished just next door to the failed state of southern Somalia, where millions have died from hunger and civil war. During the famine in 2011, it was Somaliland that offered humanitarian aid to its southern neighbour.

"When a house next door to you is on fire for 22 years, and you still maintain peace and stability, it's a remarkable achievement," says Sadia Abdi, director of the Somaliland office of ActionAid, an international anti-poverty group.

"The international community seems to be turning a blind eye to us," she says. "It has to open its eyes."

Flying into Somaliland gives any visitor a vivid glimpse of its challenges. Descending toward the runway of Berbera airport, you gaze out over the scattered thorn trees of a seemingly lifeless desert. The airport tarmac is empty under the blazing heat, except for a few carcasses of wrecked planes. Sand drifts over the potholed road to the capital, Hargeisa. Aside from the tin-roofed shacks and cinder-block buildings of an occasional village, you see little more than herds of goats and camels in the scrubland along the road.

Yet look more closely: The scaffolding and piles of bricks at the airport are signs of expansion. Tall buildings are rising in Hargeisa's construction boom, and there are traffic jams in the bustling city streets.

The telecommunications sector is thriving, with most people using mobile money on their cellphones to pay for their daily purchases. And there is talk of mineral and oil discoveries, sparking excitement about a natural resources boom.

A stateless history

One reason for Somaliland's success is the relatively light hand of its former colonizers. While southern Somalia was governed by authoritarian and fascist Italy, the north had an almost stateless history. It was colonized by Britain, which treated it with "benign neglect," according to researcher Gérard Prunier. As long as it provided a steady supply of cheap meat for the strategic British garrison across the sea at Aden, the north was allowed to maintain its traditional system of decision-making by clan-based assemblies.

The south and the north were both granted independence in 1960. For five days, the former British protectorate in northern Somalia was an independent nation. Then, in a hopeful moment of pan-Somali nationalism, it decided to unify with the south, creating the Somalia that has officially existed since then.

But after the military takeover by Mr. Barre in 1969, political parties were banned, hardline Soviet-backed socialism was introduced, and repression grew worse. Exiles from northern Somalia formed a rebel militia, the Somali National Movement, which gained power in the northern cities by 1988.

The southern-based regime struck back with a horrific wave of artillery attacks and bombing strikes, killing an estimated 50,000 people and forcing a million to flee their homes. Regime forces slaughtered cattle in the north, poisoned wells and tortured civilians.

After the Siad Barre dictatorship was finally overthrown in 1991, the north declared independence and the south fell into civil war. For two decades, most of southern Somalia's peace negotiations were foreign-funded boondoggles at luxury hotels in Kenya, Ethiopia, London and Djibouti, led by warlords who had every incentive to prolong the talks to collect their per-diem payments and enjoy their five-star accommodation.

In Somaliland, by contrast, peace among the clans was negotiated by traditional assemblies of elders from every clan, funded by the Somalis themselves, in their own cities – which created financial and social pressure to hunker down and reach an agreement.

"Our ideas and agendas were indigenous and inclusive," says Bobe Yusuf Duale, a scholar and former Somaliland cabinet minister. "That's what saved us."

A peace deal in Somaliland was reached in 1997 and a new constitution was approved in a referendum four years later. The role of the clan leaders was formalized in a House of Elders, the upper house of a bicameral parliament. The constitution allowed a maximum of three political parties in national elections, based on those that won the most votes at local elections, which forced each party to reach across clan lines to form broad alliances.

Since then, Somaliland has been generally free of military conflict, although in 2008 it was hit by a wave of car bombs for which southern-based Islamist militants were blamed. The terrorist attacks led to the creation of a special police unit to provide security to all visiting foreigners, including police escorts from the airport.

Free elections, and a country in limbo

Somaliland's elections have been remarkably free, even if not always completely fair (some cases of multiple voting and underage voting have been noted by election observers). Yet the world has refused to offer diplomatic recognition, seeing little strategic interest in Somaliland and fearing that its independence could trigger a flood of secession movements in other countries.

Somaliland has been "left in legal limbo – a country that does not exist," says a report by Human Rights Watch. It has its own currency, its own visas, its own flag, and its own passports, which are sometimes accepted abroad.

The president of this unrecognized country is Ahmed Mahamoud Silanyo, a former opposition leader who won the 2010 presidential election with just under 50 per cent of the vote. He is a British-educated economist who served in the cabinet of Siad Barre in the 1970s and then helped found the Somaliland rebel movement, which he led for most of the 1980s.

He remembers the toppled dictator as a tough, hard-working man who seemed to be modernizing Somalia in his early years. "Like all dictatorships, it deteriorated," he recalled in an interview in the presidential palace. "The power went to his head."

It was a lesson to Somaliland, which has done everything possible to avoid the kinds of repression that devastated its cities in the 1980s. The president gives much of the credit to the House of Elders. "It represents all society, including smaller tribes and groups that wouldn't get enough votes in an election," he said.

"It's the voice of reason and stability, and it plays a big role in arbitration. When we have trouble, we send our respected elders to negotiate."

Despite the progress, the legacy of dictatorship lingers on in many corners of the government. Police have shot protesters, detained and deported Ethiopian refugees without charges, and arrested at least 30 journalists from Somaliland's lively media sector over the past two years.

"The police culture here is still very authoritarian," says Guleid Ahmed Jama, a lawyer who heads the Somaliland Human Rights Centre. "There's no international pressure … so the government does whatever it likes."

Abdi Fatah Mohamed Aidied, who runs a daily newspaper called Sahafi, was jailed for two days after his newspaper reported that the U.S. Central Intelligence Agency was sending a team to Somaliland. Intelligence agents demanded to know his source. He refused.

"The police are not well educated and they don't understand the constitution," he says. "The government orders the police to attack journalists without search warrants, and they just follow orders."

In an even more disturbing case, a newspaper editor was attacked and injured by masked gunmen, one of whom was later identified as a policeman. "Everyone was shocked," said Adan Abokor, a scholar and democracy activist. "It had never happened before."

The president, Mr. Silanyo, insists that the Somaliland media are free. "If they are arrested because they are press, that's wrong," he said. "When it comes to my attention, we release them immediately."

Another source of tension is the growing international recognition for the fledgling government in Mogadishu, which claims jurisdiction over the entire country, including Somaliland. The United Nations recently decided that Somaliland's aviation sector should fall under Mogadishu's authority – sparking a furious reaction from Somaliland and a temporary retaliatory ban on UN flights here. It was a harbinger of more potential conflict as Mogadishu pushes for greater power.

"If Mogadishu keeps claiming the right to the whole space, it could lead to a war," says Ms. Abdi, the ActionAid director. "Our security could be on the line."

Somalilanders see their independence as sacrosanct, even if the world ignores them. "There's no way back," says Khader Aden Hussein, a Hargeisa businessman and parliament member.

"Our people are determined, and you can sense it in their mood. We're not going to reverse what's been achieved in the past 20 years. We will exist."

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