Riding the Storm: Somalia’s Free market.

‘Necessity is the mother of invention’

-Plato

In the year 1331, It was  the great Islamic scholar/explorer Ibn Battuta  who described  Mogadishu, the capital city of Somalia  as one of the best cities of the world in which to do business. As it is evident from the date, that was a long time ago and Mogadishu has lost that recognition because of the 1991 civil war that caused many deaths, displacements, destruction and  lawlessness .

Despite all the unrest, Somalia has maintained a fairly informal economy without government intervention with a near 0% taxation. This form of free market is mostly driven by investments and finances of the local people and the Somali Diaspora. In 2009, Somalia’s GDP was estimated by the CIA to be $5.731 billion, with a projected real growth rate of 2.6%. Although the agriculture sector is the main engine of the economy and accounts for nearly 65% of the GDP, the other two sectors that can’t be ignored and have surprised many skeptics are the telecommunications and finance sector. The former, in private control has been totally revolutionized and transformed.

For instance,Golis Telecom Group now offers one of the most technologically advanced and fairly priced telecommunications and internet services to many businesses and households across many regions in Somalia. Hormuud telecom accounts for nearly $40 million a year. People are now using mobiles to transfer money and make purchases. It takes just three days to get a landline connection up and running while it takes many months just across the border in Kenya. The tele-density in Somalia is much higher than many countries in Africa and three times greater than our neighboring country, Ethiopia.

Despite the non-existence of a Central Bank for nearly 15 years, the payment system of the country is fairly advanced. This is due to the emergence of private money transfer operators(MTOs). These remittance firms known in the country as Hawalas make sure that trade, transfer of money and transactions are done cheaply and quickly. This sector only accounts for more than one billion US dollar a year.

 On the other hand, the livestock sector which accounts for 40% of the GDP and nearly half of the export earning is now giving a fierce competition to countries like Australia who have a long history of exporting livestock to the middle east. The combination of high quality and competitively priced live stocks and the near proximity to the middle east is helping  grow the Somali live stock industry. Now countries like UAE and the Kingdom of Saudi Arabia are building facilities inside the country making this sector more competitive and lucrative.

All of this is the upside of the nearly free market conditions that exist in Somalia but at the same it is worth to mention and bring attention to negative aspects this form of free market economics created in the country. Due to the lack and absence of government and regulatory agencies, many businesses and self-serving individuals have taken advantage of the anarchy in Somalia.

In the market you can easily buy and sell illegal weapons. Counterfeit products and fake currencies are in abundant circulation in the big markets of Somalia. Many Pharmacies do not have legal licenses to import and sell life-saving drugs and because of that sell expired drugs to people. This has caused many illnesses and deaths. Deforestation  is at its highest peak because of people illegally chopping  and burning down trees and exporting them as charcoals . This has had a huge impact on the environment. Many businesses and firms are also colluding and forming monopolies which makes the free entry/ exit of the market by start-ups and smaller firms nearly impossible.

This is the dark side of the free market economy we have in our country and I hope our next government will fill the vacuum it has left behind and become a government by the people, of the people and for the people.

Due to the lack of effective government for along time and the exception of these unfortunate negatives,the spirit, entrepreneurship, and business ingenuity of the Somali people have never been lost. In fact it made the Somali people more resilient, hardworking and made them realize the need to be self-sufficient and determine their own future instead of depending on the government.

Somalia’s Human Capital Flight

Image via Wikipedia

“Alone I can travel fast, but together we can travel far”.

-Somali proverb

Since the collapse of the last government of Somalia in 1991, the best and the brightest of the Somali citizens had fled the country in search of better lives and opportunities abroad. This has caused a “brain drain” in the country. This term “brain drain” is defined on Wikipedia as a large-scale emigration of a large group of individuals with technical skills or knowledge.

The political and social instability that prevailed in Somalia led these people to flee the their homeland and settle in countries where they could get political stability, better opportunities, high living standards, freedom and recognition.The latest numbers  by the World Bank says that a staggering 50% of all the educated Somali people had left the country. one can imagine the magnitude and the consequences of such human capital flight can have on a small country like Somalia.

 The ” Somali Diaspora” have settled mainly in the US, Europe, the Middle East and East Africa. They have made huge and  unparalleled contributions to their country in many ways. One special case that deserves much honor and appreciation is the 1 billion US dollar they send every year back to their loved ones  in the form of remittances. This has become the life line of many Somalis back home. But that is not just enough. They need to come back to their beloved country and participate in the rebuilding and rehabilitation of our long suffering nation. Their international exposure, talent, connections, know-how and expertise is much needed in the country and I believe they are the ones that will make the difference.

I know many of you will be saying: why do we need to come back to Somalia, when there is destruction, sectarian violence, tribalism, and never improving economic conditions? That is a great question, but it is also fair to raise another counter argument which is: If you don’t come back and help your own people, then who is going to lead and  save your country? God helps those who help themselves. If you don’t rescue yourself and don’t determine your future then individuals and groups who don’t have the best interest of Somalia in their hearts will hijack and steer the country into anarchy and starvation. So far we have seen what they have done to our country.

Mark Bowden asked this question in a piece for The Philadelphia Enquirer.  His answer was pessimistic:

One of the things Somalia lacks is a capable, homegrown movement of educated, determined nationalists capable of fending off the religious radicals, disarming and controlling the warlords, and standing up for the interests of people who just want a stable, civil society. I wonder whether the drain of Somali talent, money, and ambition to other places in the world — so evident in Minneapolis-St. Paul [with its large Somali population] — isn’t one of the reasons no such movement exists. …

Through out history we have seen/heard many men and women who left their personal interests behind, sacrificed their livelihoods, endangered their lives for a common and just cause, for something beyond them. Lets all put our differences aside and come together. Lets all sacrifice, lead our people and make them believe in the impossible. Lets all hold hands and together bring back the glory of our beloved Somalia to where it once belonged.

Black Gold in Puntland: Cure or a Curse?

Oil drilling operations have started in the semi-autonomous region  of Puntland. It is a region which is relatively stable compared with the other regions of Somalia and is located in northeastern Somalia. Unlike neighboring Somaliland,