The Somalia Economy

Somalia has a surprisingly strong economy. Make no mistake the country is still quite poor but given that they have virtually no government they are doing remarkably well. Admittedly a large part of the income in the country is the result of criminal activity but there is also a remarkably strong informal economy. This is mainly based on agriculture but there are also a number of small scale industries being run. The bulk of Somalia foreign exchange comes in the form of remittances from Somalis working abroad, mainly in Middle East. Again this is quite an accomplishment given that there are no banks in the country. An informal banking sector has sprung up to handle these transactions. The Somalis have proven to be remarkably resilient.

The majority of Somalis are working in the agricultural sector. This is mainly subsistence farming but livestock is one of the few exports from Somalia. Most of the livestock that they export goes to countries in the Middle East. The industry that does exist is almost all small scale and produces products that are sold at local markets rather than exported overseas. In a lot of ways Somalia may well be a model for how to build an economy in a very poor third world country. The total lack of government involvement has proven beneficial in a number of ways.

A surprisingly strong area of the economy in Somalia is the telecommunications sector. The country has a surprisingly strong infrastructure in this area and it has managed to survive all of the fighting. The result is that Somalia has one of the strongest telecommunications sectors in Africa. It is also possible to buy brand new high tech gadgets at the markets in Somalia. However most of these are stolen as a result of the piracy that is rampant in the area.

Clearly the prospects for the Somali economy to grow are severely limited by the internal fighting and the total lack of a government. At some point they are going to have to move beyond the formal economy that they currently have. This is going to require them to become involved in international trade but that won’t happen unless there is a stable government. Since this looks unlikely to happen anytime soon Somalia is likely going to struggle along for many years to come. They have been remarkably resilient but clearly things need to change.

Other countries in similar economic circumstances would be receiving large amounts of foreign aid. Somalia hasn’t been so lucky. The problem they have is the total lack of a government and the fact that foreign aid workers can’t safely enter the country has made this impossible. In many ways this makes the achievements of the Somali economy even more impressive. However this is another thing that is going to have to change if the country is ever going to get back on strong economic footing.