Somalia witnessed political and security turmoil in the period that followed the outbreak of the civil war in the country in 1991, which put the economy of Somalia on the brink of collapse, as most of the infrastructure was destroyed, but it began to improve and recover gradually after the private sector achieved important gains in the past ten years due to relative improvement. For the security and political situations.
Reports issued by international institutions indicated that the gross domestic product in Somalia reached 7.70 billion dollars in 2019, after 10 years ago it was 4.1 billion dollars, with a growth rate of 2.9%.
The World Bank had expected this rate to continue to rise and reach 3.2% in 2020 had it not been for the Corona pandemic, which impeded progress and kept the rate at its pace.
Somalia is considered one of the poorest countries, and its economic situation is still fragile and modest in relation to the capabilities available to it and qualifies it to occupy a much better economic position than it is now.
What wealth does Somalia have?
Somalia is rich in tremendous wealth, and has animal wealth estimated at 40 million head of camels, cows and sheep, as well as agricultural wealth, as arable land is estimated at 8 million hectares, making Somalia a food basket for the countries of the region.
Since 60% of Somalia's 15 million people live in rural areas and work in livestock and agriculture, the two sectors have been vulnerable to calamities and crises since 2011 due to recurrent droughts and the war between government forces and the youth movement, which caused the displacement of about 2.9 million people. A person who used to practice herding and agriculture, which exposes the country to food crises.
According to the latest report of the United Nations Office for the Coordination of Humanitarian Affairs, 5 million Somalis (a third of the population) are in need of humanitarian aid, in addition to poor management, lack of resources and the use of traditional methods and old methods of livestock and agriculture that made it difficult to exploit these two sectors in a way that improves the situation of the population and the country's economy.
On the other hand, Somalia has a second coast in length in Africa and contains various types of fish and marine animals, and if they are well exploited, this would contribute to improving the economic situation in the country. However, Somali fishermen lack ships, fishing boats, advanced fishing capabilities and modern tools, and they fish with boats, canoes, machines and nets. Traditional fishing, so their returns hardly cover the local market at best.
Likewise, local fishermen are suffering a fierce war from foreign fishing vessels that engage in illegal fishing in Somali waters that destroy their boats and nets and take what they fish, taking advantage of the lack of a strong guard of the Somali coast to deter them and protect local fishermen.
And such practices turned Somali fishermen more than 10 years ago into pirates to target and hijack all foreign ships that were passing through Somali waters without dispersal, which is what the world army to eliminate the pirates without illegal fishing that takes annually 132 thousand metric tons of fish worth 306 million dollars annually Of Somali waters, according to the Global Fisheries Insurance Authority in 2015.
Somalia also has oil and natural gas reserves, and exploration and exploration work began even before the country's independence in 1960, and some of them believed at that time that Somalia would turn into an oil country, but the situation after years is still the same and the dream has not been fulfilled.
Trade is one of the main pillars of Somali economic activity (Al-Jazeera)
Exploration companies suspended their activities and activities in Somalia after the fall of the previous military regime in 1991, but exploration and exploration work resumed 8 years ago, especially in the coasts, due to the difficulty of carrying out such works on land due to security conditions.
The geological survey discovered the presence of huge quantities of oil on the Somali coasts, and it was planned that the Somali Ministry of Petroleum in 2020 would begin granting licenses to oil companies to start the extraction process, but this has not happened yet.
As for the minerals that Somalia enjoys, they are: uranium, gypsum, tin, copper, bauxite, iron ore, salt, which are also not mined except for salt.
Despite these wealth, Somalia is one of the least developed countries in the world and is ranked 165 in the development index classification, and its poverty rate is very high, reaching 73%, while unemployment is rampant at a rate of 67% among the youth group, which constitutes 70% of the country's population.
What productive sectors does the Somali economy depend on?
The economy of Somalia depends primarily on the livestock and agricultural sectors, which contribute 40% of the GDP and 50% of the revenues, and the services sector comes in second place, contributing 32% of the GDP, especially in the field of communications and remittances managed by the private sector.
According to Oxfam, the Somali expatriates send at least $ 1.3 billion annually, from which about 40% of Somali families benefit directly or indirectly, and then the industrial sector contributes 7.4% of the GDP, as it is found in Somalia. About 104 industries are small industries, and the fishing sector, which contributes 2% of the GDP, comes in last place.
How much is the trade volume in Somalia estimated and are there opportunities for foreign investment?
Trade is one of the main pillars of Somali economic activity and played a major role in saving it from collapse during the crisis of the civil war.
Although trade in Somalia is free and it is the right of any Somali to practice it, it lacks some of the foundations to legalize it and lacks a monitoring mechanism that restricts quality and safety, especially imported goods, as well as laws that protect local industries from the invasion of foreign commercial goods.
The other thing is that imports and exports are unbalanced and the gap between them is very large, according to the CIA's information book, the value of imports in 2018 was estimated at $ 94.43 billion compared to only $ 819 million for exports, which means that hard currency goes abroad.
The most important imports of Somalia from abroad are foodstuffs, oil derivatives, industrial devices, building materials and qat, while livestock, bananas, sesame, leather, frankincense, charcoal, fish and scrap are exported abroad.
Somalia's economy depends primarily on the livestock and agricultural sectors, which contribute 40% of the GDP (Al-Jazeera)
China, India, Saudi Arabia, the UAE, Yemen, Oman, Pakistan, Turkey, Kenya and Ethiopia are Somalia's most important trading partners.
As for foreign investment opportunities, they are available in various fields, but the security conditions do not allow that. Nevertheless, there are limited foreign companies present in the field of services, such as the two Turkish companies, "Albayrak" and "Favori", which operate the international port and airport. In Mogadishu, respectively, and the DP World, which operates the port of Berbera in the Somaliland region separated from Somalia since 1991, as well as the port of Bosaso in the state of Puntland in northeastern Somalia.
How is the Somali government facing economic challenges?
The economic potential of the Somali government is very modest because it does not control the entire territory of the country. The region of Somaliland, which declared its secession from Somalia in 1991, and the areas under the rule of al-Shabab are outside its accounts and do not receive any revenues or taxes from them, just as they do not get from many areas of the country.
The government relies on revenues from the international port and airport in Mogadishu and limited tax revenues, so it seeks foreign aid to run the affairs of the state, evidenced by the fact that the 2020 budget was $ 476 million, 231.8 million of which are aid provided by donor countries, which is nearly 50% of the budget.
On the other hand, the Somali currency (the shilling) lost its purchasing power and all its denominations disappeared except for the "thousand shillings" category, which remained steadfast and its circulation became in a narrow range, while the dollar is the one that dominates all transactions, whether in the government sector and the private sector that controls important economic aspects, The central bank, which does not operate at the level of its effectiveness, has not yet succeeded in issuing new copies of the national currency.