Helping Somalia attract private investment will require realism, rigor and reforms
July 18, 2017 Editor 0
The president of the Somali Chamber of Commerce, Mohamoud Abdi Ali, joins with the country’s Minister of Commerce and Industry, Khadra Ahmed Dualle, at the IFC-sponsored Public-Private Dialogue at the Somalia Conference, which was convened in London in May 2017. The need to increase revenue, growth and trust led to the creation of the Public-Private Dialogue. Photo credit: MPF.
Stabilizing countries that have long been afflicted by fragility, conflict and violence (FCV) – and helping them shape effective reforms to strengthen the investment climate – is one of the most difficult challenges in international development. The task is all the more severe when, as in Somalia, a large proportion of the population has been displaced by violence and natural disaster and when the economy is overly concentrated on a few sectors. Such factors make rebuilding investor confidence a daunting challenge for the newly elected government.
However, despite these challenges, Somalia represents a rare example of private-sector resilience. The major sectors of the economy survived the tumultuous period after the collapse of the state in 1991. Entrepreneurs in Somalia and abroad continue to innovate and adapt in a country void of regulatory frameworks or government oversight. Domestic mobile-money transfers average $1.2 billion in monthly transactions, and mobile money usage is above 70 percent.
Nonetheless, economic growth in Somalia has stagnated and has not resulted in a peace dividend for the population. Government revenue is low – around 2.5 percent of GDP – in an economy driven by consumption, as identified in the World Bank Group’s Somali Economic Update (SEU) from 2016. According to the SEU, two of the biggest obstacles to equitable growth are access to finance and lack of regulations. Moreover, investment in priority sectors is low, held back by protectionism, conflict and instability.
Somalia was the focus of an international conference in May 2017 in London that brought together some of Somalia’s top private-sector firms, development institutions and government leaders to discuss how to jump-start private-sector-led growth and achieve long-term peace and development. Among the distinguished attendees were the newly elected president of Somalia, Mohamed Abdullahi Mohamed “Farmaajo”; Prime Minister Teresa May of the United Kingdom; United Nations Secretary-General Antonio Guterres; and the European Union’s foreign-policy chief, Federica Mogherini. The World Bank Group delegation was led by Jan Walliser, the Vice President for Equitable Growth, Finance and Institutions.
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Categories: World Bank PSD
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