Three Pieces on Somalia’s Economy

As officials of various governments head to London for the February 23 Conference on Somalia, some interesting analyses are coming out regarding Somalia. Several of the best pieces share a focus on the country’s economy, though they approach the topic from different angles. Looking at the economy raises all kinds of important issues that go beyond what usually makes headlines – ie, war, terrorism, and famine.

Reuters‘ Abdi Sheikh and Richard Lough:

One reason for the lack of political progress is that war and instability are lucrative. Somalia’s power brokers, pirate kingpins and business tycoons are reluctant to give up the status quo.

Diplomats say many players in Somalia’s turmoil find that by spoiling reform they can continue to reap the spoils of war.

Talk of peace and reform unsettles bribe-seeking politicians, traders smuggling arms and contraband, militants making deals with pirates and aid contractors taking cuts.

Hussein’s frustration is now vented at Somalia’s rotten political system, where corruption is rampant and the selfish interests of power brokers too often trump national interests.


How much money is stolen, or handed directly to politicians is hard to pin down. Some Arab countries are known to carry suitcases stuffed with cash into Somalia, diplomatic sources say, so it is difficult to track the money.

One wonders if other governments also bring suitcases stuffed with cash.

Dr. Laura Hammond of the School of Oriental and African Studies:

With up to 1.5 million Somalis living abroad, and remittances estimated at $1.3bn-$2bn a year, it is clear the diaspora is immensely important to the country’s survival. But what role exactly is there for the diaspora to play in the political future of the country?


We found that in all areas, the diaspora was heavily involved in promoting education, healthcare, public infrastructure and private enterprise. In the relatively peaceful north the emphasis was on post-conflict reconstruction and development, whereas in the south the more dire humanitarian picture meant more people were involved in providing life-saving support to their relatives and communities.


However, the picture was not entirely rosy. On the ground, many expressed concern that people from the diaspora were taking jobs that could have been done by local Somalis. Some complained that diaspora members came with their money and their university degrees but did not understand the political and practical realities of living in present-day Somalia. Diaspora returnees complained local people did not appreciate what they were trying to do for them.

Mary Harper of the BBC:

It may come as a surprise that, despite coming top of the world’s Failed State Index for the past four years in a row, Somalia ranks in the top 50% of African countries on several key development indicators.

A study by the US-based Independent Institute found that Somalia came near the bottom on only three out of 13 indicators: Infant mortality; access to improved water resources and immunisation rates.

It came in the top 50% in crucial indicators like child malnutrition and life expectancy, although this may have changed since last year’s famine.

“Far from chaos and economic collapse, we found that Somalia is generally doing better than when it had a state,” said the institute.

“Urban businessmen, international corporations, and rural pastoralists have all functioned in a stateless Somalia, achieving standards of living for the country that are equal or superior to many other African nations.”

What are your expectations for the London conference? And where do you see Somalia heading from here? Do things like help from the diaspora and local entrepreneurship offer hope, or is the way cash moves in Somalia too problematic for the country to move forward?

9 thoughts on “Three Pieces on Somalia’s Economy

  1. If the African diaspora is so important to development in Africa, why is so little being done to engage with them?

    This situation vexed me to no end as a student in the UK. You have bright young things with degrees from the SOAS pontificating on all things Africa, while those of us with both the education, knowledge of the language and contextual knowledge are excluded from the discussion.

    Of course, most externally driven assistance projects fail and fail woefully. Yet the West never learns.

  2. Pingback: Somalia: Weekly Piracy Report | The Roman Gate

  3. The first one simply confirms what should be obvious from the past twenty years. The rich are getting rich by the current system and not by creating a strong state that might be less easy to bribe and exploit. From the mention of smugglers and pirates I assume that the worst spoilers are the ‘new money’ elites that have risen to wealth and power as a direct consequence of the war but unfortunately the report doesn’t mention whether the old elites are also opposed to the formation of a strong state. In any case we can safely infer that either the spoilers assume that the war will continue indefinitely (a dangerous assumption) or that regardless of whether Al-Shabaab or the TFG are victorious the spoilers will still be able to make money anyway and so they don’t need to choose a side.

    However I do have to question the narrative in the first article (which we see often in many different areas) that the powerful state is really so foreign to so much of the developing world. It seems to me that state power relative to private actors and non-government organizations will vary considerably in every nation at different times. There was an Afghan state prior to the 1980s which, while not as powerful as a state should be to endure, was at least no less strong than Pakistan. In contrast Indonesia had a strong state prior to independence but has since grown considerably weaker.

    • A strong state isn’t necessarily a good thing. The Soviet Union was much stronger state than the Russian Federation, but one can argue that Russians are better of today than under communism.

      • Personally I’m not so sure. The Russian people might have some small political opening but in terms of state aid, corruption and security things have gone drastically downhill.

        In any case both Somalia and Afghanistan would benefit immensely from a strong state right now. Compared to another decade of this I might have even preferred the U.I.C.

      • Theoretically, Somalia and Afghanistan should benefit from a strong state, but due to culture and recent history, the possibility of a strong state emerging in both of these nations is very slim.

        What these nations need is a Swiss-style confederation, with power devolved from the center. For e.g. let Somaliland and Puntland have a degree of autonomy within a confederation.

      • To be honest, I don’t know. My suspicion is that there are at least two strong reasons why. The first is that the two aren’t trying to take all of Somalia but rather are separatist in nature. They took a smaller piece and held onto it. It would be interesting to check if certain political movements were fairly strong in the two prior to declarations of independence and autonomy. That might explain why they’ve managed to keep some relative peace compared to the Somali south.

        The second is that many potential spoilers (such as pirates) may feel that they’re better served by peace in those areas. You can’t have the entire region going through war, you need somewhere to spend what money the instability gets you. The ports are one place and the more peaceful north is another. It certainly is known that many Somaliland politicians have been getting donations from them.

        There are probably more than just those two but I would bet that profits for the rich* and politics based on geography, ethnicity or something else communal in nature

        As for decentralization, it might help but to paraphrase a writer on the Vietnam War and calls for power to be decentralized there (this was in the 1970s) ‘power must first be created before it can be decentralized’. You could have the TFG (assuming it ever wins) give official recognition to the warlords and groups that control various parts of Somalia, but absent a state you’ll still just get fighting over who controls what and little effort made to actually perform the tasks of the state; i.e. tax collection, road and bridge building, police forces etc.

        *Another point to check is whether the business and political elite in Somaliland and Puntland are the same as in Somalia.

    • Gyre,

      But why didn’t Somaliland and Puntland follow the same route? Why did Somaliland and Puntland decide that peace, not war was more profitable?

  4. Anyone wondering why Puntland and Somaliland are so peaceful and the rest of the south isn’t should remember that these regions enjoy less clan diversity than the rest of the country. This Independent Institute sounds kinda libertarian and so I don’t trust their findings, the idea that Somalia is better off in any way now than it was under the previous real govt (despite its problems) is ridiculous.

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