Download Somalia

NS4301
Summer Term 2015
Somalia Political Economy
Plan
• A General Outlook to the Somalia
• Information
• Why Turkey is interested in Somalia? (Soft Power)
• Historical Ties and Current Economic Relations
• The Future of Somalia Economic Growth
• Opportunities
• The Role of Government
• The Challenges for Somalia’s Economic Reconstruction
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General Outlook
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General Outlook
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General Outlook
• Capital City: Mogadishu
• Population: 10,616,380 (est.)
• %85 Somali, and %15 Bantu and non-Somali (including
Arabs), majority is the Sunni Muslim
• Median age for men: 17,9
women:17,6
• Infant mortality rate: 98,39 / 1000 live births
• Child labor: %49 (2006 est.)
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General Outlook
• Somalia maintains an economy largely based on
livestock, remittance/ money transfer companies,
telecommunications.
• Agriculture is the most important sector:
Accounts for %40 of GDP and %50 of export earnings.
• Principal exports: livestock, hides, fish, charcoal, and
bananas.
• Principal imports: sugar, sorghum, corn, machined
goods.
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General Outlook
• GDP (Purchasing Power Parity)
• 2008 ($5.607 billion)
• 2009 ($5.75 billion)
• 2010 (5.896 billion)
• Country Comparison to the World: 169
• GDP (Per Capita): $600(est.), ranks 229 among 230
countries
(only better than Central African Republic)
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History
• Britain and Italy colony for a long time
• Became independent in 1960.
• Ruled by dictator Siad Barre until 1991
• Civil War started in 1991 and took almost two decades
• Al-Shabab: the biggest threat to Somalia Government
• The country lacks the even basic infrastructures,
Basic education and health needs , and there is no
government operating properly.
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Turkey’s Interest in Somalia
- What is soft power?
- Assets of Soft power:
- Foreign Policy
- Culture and History
- Politics
- Economy and military can also be the assets of soft
power, if they are used in humanitarian contexts.
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Turkey’s Interest in Somalia
- The relations date back to 15th century. (Ottomans and
Somalis)
- Somalia’s coastal sides were controlled by Ottoman
Sultanates in 17th century.
- Contemporary relations started with the opening of the
Turkish Embassy in 1979.
- In May 1993, a Turkish General appointed as the
commander of UN Forces in Somalia.
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Turkey’s Interest in Somalia
- After the end of the Cold War, Turkey’s foreign policy
started to change, focusing particularly on Muslim
countries of former Ottoman Empire, including Somalia
and other states in Africa.
- Search for export markets, geopolitical interests,
geographical proximity and shared cultural, historical
and religious links made Somalia a natural candidate for
Turkey’s attention.
- Since 2011 (devastating drought in Somalia), Turkey’s
humanitarian aid to Somalia exceeded $400 million,
helping the reconstruction of the state by providing
education, health, transportation, and security aids.
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Future of Somalia’s Economy
Lt. Sinan Kose
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Challenges of Somalia’s Economy
• Somalia as being a country that is coming out of two
decades of civil war, 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.
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Challenges of Somalia’s Economy
• 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 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.
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Future of Somalia’s Economy
These are huge economic challenges, however 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 abundance 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 and
China.
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Future of Somalia’s Economy
 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.
 During the civil war, Somalis investors invested places
like United Arab Emirates and Kenya:
As the security situation improves, Somali investors will be
shifting money from overseas to Somalia.
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Future of Somalia’s Economy
 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 in 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.
The Diaspora involvement in the economy alone is going to
become an engine of growth for the economy.
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Future of Somalia’s 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.
As a regional example, Somali government can learn from
Ethiopia in ways to improve and apply sound tax collection
regime.
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Future of Somalia’s Economy
 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. As a regional example Rwanda is a country that
mastered using international aid to the fullest benefit.
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Future of Somalia’s Economy
 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.
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Future of Somalia’s Economy
 Diaspora Recognition: The economic impact of the Somali
Diaspora cannot be ignored.
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.
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Challenges
Lt. Sadik Dogan
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Challenges for Economic
Development
1. Certification
- Somalia’s government does not have the capacity to
participate in certification schemes to provide authenticity
documentation that would enable business to sell globally.
- Ex: Sesame seeds are grown in large quantities in Somalia-in
2012 the country was the 12th largest producer in the worldexporting them is a challenge.
- No proper certificatory regime- EPA ( Economic partnership
agreement) between Somalia and Europe.
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Challenges for Economic
Development
2. Trade difficulties
- Somalia is not a member of any regional economic blocs, and
it has few formal trade deals with other nations.
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Challenges for Economic
Development
2. Trade difficulties
- In 2012, Somalia exported goods worth US$693 million (509
million euros), according to data from the European
Commission’s Directorate-General for Trade. While this
represents a significant increase - in 2008, exports were less
than half that number - the country still runs a large trade
deficit. In 2012, its imports were valued at $1,818 billion
(1,335 million euros).
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Challenges for Economic
Development
3. Currency reform
-Restoring the credibility of Somalia’s currency will also be
crucial to economic development. The Central Bank has
identified “the introduction of new and unified currency” for
Somalia as one of its strategic goals for the next five years.
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Challenges for Economic
Development
3. Currency reform
- “There were (and still are) several versions of the same
currency (Shilling) in circulation concurrently, and most of them
are fake currencies,” the bank noted in its Strategic Plan 20132018.
- In mid-2013, the International Monetary Fund resumed
relations with Somalia after 22 years. For now, it will not provide
loans to the country, but it pledged to provide technical
assistance and highlighted currency reform as a major priority.
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Challenges for Economic
Development
4. Managing oil deals and revenue
- There are massive reserves, and even before the collapse of
government, large firms were exploring the possibility of
mining oil and gas. But lack of legislation and political
wrangling at regional and national levels impede development
in this sector.
- There is currently growing hostility between the Federal
Government of Somalia and regional administrations that
have signed oil deals independently of the government
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Challenges for Economic
Development
5. Social engagement
- Need to ensure that economic growth benefits the people,
especially as foreign direct investment grows.
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Challenges for Economic
Development
5. Social engagement
- Following the collapse of the Siyad Barre regime in 1991, the
private sector stepped in to provide most basic goods and
services, and has actually performed relatively well throughout
this period despite rampant insecurity and lack of infrastructure.
- With international investment, there are fears that the influx of
foreign money will give rise to greater corruption.
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Somalia
Questions?
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