Somalia is a country that is coming out of two decades of civil war. The Somali economic challenges are many and addressing them will not happen overnight. Security situation is improving but still volatile. The governance is fragile and lacks the capacity to carry out basic functions  of governing in providing security and economic opportunity.  Credible public revenue “taxation” systems is not fully functioning.  Without taxation, creating jobs,  reconstruction of infrastructure, health and education is very challenging.

The political leadership is constantly engaged in a petty political squabbles that squander valuable time and resources. The majority of the citizens are very poor with not much money to spend outside of their daily necessities such as food, water and shelter.  Government grand vision in  infrastructure development programs to create jobs and elevate poverty is very limited. Institutionalized corruption in the government, the private sector and Non-Governmental organizations is a major problem hindering economic development.

Opportunities

While these are huge economic challenges, there are abundance of economic opportunities. The overall security situation is improving.  The threat of Al Shabab is fading and will continue to fade as African Union and Somali troops put more pressure on them and better intelligence dries up their finances and resources.

Somalia has abundant natural resources that are in high demand all over the world.  There is growing demand for Somali livestock and farm products in the growing economies of the Middle East. With the growing middle class in China, Chinese officials have shown great interest in recent months in getting involved buying Somali livestock which will further diversity the market place for Somali livestock and farm products.

The Somali economy is powered by remittances from overseas.  North America and Europe are the main sources of remittances. The falling oil prices have left money in the pockets of the citizens of these countries.  Somalis being part of these communities will be sending part of the saving from petrol and gas back to their loved ones back home.The drop in oil prices will also be felt in Somalia and will create more trade movement that will positively improve the economy.

During the civil war,  as Somalis investors  sought safer investment for their money, they invested places like United Arab Emirates and Kenya and those inside the country gravitated towards real estate. As the security situation improves, Somali investors will be shifting money from overseas to Somalia. Local investors with money locked in real estate will be seeking more productive ventures and that will generate positive economic activity for Somalia.

The number of Somalis that have left the country during the civil war is estimated at more than 4 million. Most have left since 1990 and have settled in North America and Europe; countries with exceptional education and socio economic development. The improving security situation inside Somalia have resulted a significant number of the Somali Diaspora to return home with acquired new skills, knowledge, and new perspectives on how to do business and run good government. Many are Members of Parliament, Government Ministers, NGO employees, academics, private investors and business owners. The Somali diaspora want to make a difference in their country by contributing money in the form of remittances, skills and knowledge. They have linked up across regions and tribal lines in establishing business ventures and educational institutions. The Diaspora involvement in the economy alone is going to become an engine of growth for the economy.

The Government Role in helping the economy

Tax Collection: To generate the revenue required for security, create jobs, build infrastructure, health and education, the government should concentrate in creating credible and working taxation regime that makes sure telecommunication companies and money remittances, real estate transactions, import and export companies are paying their tax dues.

Ethiopia has experience in tax collection and has effective audit systems that encourages tax payment and discourages tax evasion. The Somali government can learn from Ethiopia in ways to improve and apply sound tax collection regime.

International Aid: The government can play the constructive role in matching international aid to key infrastructure projects like rebuilding roads, bridges, ports, and factories destroyed during the civil war. International Aid can add economic vitality if employed constructively. Rwanda is a country that mastered using international aid to the fullest benefit.  For example in Rwanda, international aid is not wasted, Rwanda ties the donor aid to  key national  infrastructure development plans.

For a hypothetical example, imagine Norway want to give aid to Rwanda, the Rwandan government have two policy options: (1) Let Norway give the aid however it sees fit whether it is food, consulting or  (2) Ask Norway to build a tangible infrastructure project. Rwanda uses the later,  build a four lane road that connects between Kigali and Goma, or build 10 schools with the top ten cities with most population etc. The byproduct of this infrastructure and international aid matching is less corruption, more jobs and sustainable development.

Corruption: The Somali Ministry of Finance and Planning has shown transparency as of late but to develop economically, the culture of corruption, nepotism and disregard for the rule of law must come to an end from all government and private sectors. The government must invest technologies that will make difficult for corrupt officials to steal public funds such as electronic systems.  Payment fees  in sea port, airport, telecommunications and money remittances agencies can all be made electronically to the government directly. Creation of  an independent entity with power and mandate  that can deal with corruption is  indispensable in the fight against culture of corruption.

Diaspora Recognition:  The economic impact of the Somali Diaspora cannot be ignored and the government must engage the Somali Diaspora and implemented policies to recognize their role and contribution to the economy, and give them incentives to invest and reduce costs of doing business.

By Ali Osman
ccusmaan@gmail.com