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Despite civil unrest, Somalia has maintained a healthy informal economy, based mainly on livestock, remittance/money transfer companies, and telecommunications.[1] Livestock exports in recent years have been severely reduced by periodic bans, ostensibly for concerns of animal health, by Arabian Peninsula states. Drought has also impaired agricultural and livestock production. Because rainfall is scanty and irregular, farming generally is limited to certain coastal districts, areas near Hargeisa, and the Jubba and Shebelle River valleys. The modern sector of the agricultural economy consists mainly of banana plantations located in the south,[2] which have used modern irrigation systems and up-to-date farm machinery. Somalia has meager natural resources such as oil, gemstones, and salt.[3]

Economic progress in Somalia is decidedly mixed. As of January 2007, Somalia is still a fragile state with hundreds of thousands of refugees due to massive floods and the latest fighting of the civil war. However, when extreme poverty (percentage of individuals living on less than PPP$1 a day) was last measured by the World Bank in 1998, Somalia fared better than many other countries in Africa, over some of whom Somalia also had superior infrastructure.[4] In the absence of a Somali state and its institutions, the private sector grew "impressively" according to the World Bank in 2003, particularly in the areas of trade, commerce, transport, remittance and infrastructure services and in the primary sectors, notably in livestock, agriculture and fisheries.[5] In 2007, the United Nations reported that the country's service industry is also thriving.[6] However with a GDP of $600 per capita the country is still relatively poor.

There are signs of growth in Somalia:

Despite the seeming anarchy, Somalia’s service sector has managed to survive and grow… Mogadishu’s main market offers a variety of goods from food to the newest electronic gadgets. Hotels continue to operate, and militias provide security.
CIA Factbook[7]

Anthropologist Spencer Heath MacCallum attributes this increased economic activity to the Somali customary law, which provides a stable environment to conduct business in.[8]

Contents

Economy

Bakaara Market in the heart of Mogadishu. In the absence of government regulation, Somali marketplaces have thrived.

GDP per capita of Somalia grew 37% in the 1960s. According to the United Nations, the average GDP per capita growth rate was negative at -0.9 percent during 1970-1990.[9]

Due to the lack of government oversight or statistics, and the recent war, it is difficult to calculate the size or growth of the economy. For 1994, the CIA estimated GDP at $3.3 billion[10] In 2001, it was estimated to be $4.1 billion.[11] In 2005, the CIA estimated GDP to be $4.809 billion.[12] Real growth in 2005 was projected at 2.4%, and 2.8% in 2008.[1]

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Agriculture and natural resources

Cans of Las Qoray brand tuna fish made in Laasqoray.

Agriculture is the most important sector, with livestock accounting for about 40% of GDP and about 65% of export earnings[12]. Nomads and semi-nomads, who are dependent upon livestock for their livelihood make up a large portion of the population. For them a major economic income source is the export of animal hides. After livestock, bananas are the principal export; sugar, sorghum, and maize are products for the domestic market.[1]

At nearly 3 million head of goat and sheep in 1999, the northern ports of Bossaso and Berbera accounted for 95 percent of all goat and 52 percent of all sheep exports of East Africa. Somaliland exported more than 180 million metric tons of livestock and more than 480 million metric tons of agricultural products.[13] Some countries such as Saudi Arabia have banned imports of Somali livestock because of inadequate inspection and certification, affecting negatively the economy.[14]

A small fishing industry has begun in the north where tuna, shark, and other warm-water fish are caught, although fishing production is seriously affected by poaching, piracy, and the lack of ability to grant concessions because of the absence of a generally recognized government. Aromatic woods — frankincense and myrrh — from a small and diminishing forest area also contribute to the country's exports.

Minerals, including uranium, are found throughout the country, but they have not yet been exploited.

Light industry

Some signs of investment: in 2004, a Coca-Cola bottling plant opened in Mogadishu.

With the help of Somalis living overseas, small industries such as textiles, handicrafts, meat processing, and printing are being established. Investors have returned in recent years; for example, a Coca-Cola bottling plant opened in Mogadishu in 2004.[15]

Transportation

Infrastructure such as roads are as numerous as those in neighbouring countries but of much lower quality. A World Bank report states the private sector has found it too hard to build roads due to high transaction costs and the fact that those who pay road fees are not the only ones using the road (see free rider problem), presenting a problem with recuperation of investment. The national road system nominally comprises 22,100 kilometers (13,702 mi.) of roads that include about 2,600 kilometers (1,612 mi.) of all-weather roads, although most roads have received little maintenance for years and have seriously deteriorated. There are no railways in Somalia, internal land based transportation is solely done by truck and bus.

Berbera port.

Air transportation is provided by small air charter firms and craft used by drug importers/exporters. A number of airlines operate from Hargeisa. Some private airlines, including Air Somalia and Daallo Airlines, serve several domestic locations as well as Djibouti and the United Arab Emirates. In 1989, before the collapse of the government, the national airline had only one airplane. Now there are approximately fifteen airlines, over sixty aircraft, six international destinations, and more domestic routes. According to a World Bank report, the "private airline business in Somalia is now thriving with more than five carriers and price wars between the companies."[16]

Bosaso currently has the busiest port in all of Somalia; other smaller ports are located at Merca and Brava. Absence of security and lack of maintenance and improvement are major issues at most Somali ports. The European Community and the World Bank jointly financed construction of a deepwater port at Mogadishu. The Soviet Union improved Somalia's deepwater port at Berbera in 1969. Facilities at Berbera were further improved by a U.S. military construction program completed in 1985, but they have become dilapidated. During the 1990s the United States renovated a deepwater port at Kismayo that serves the fertile Juba River basin and is vital to Somalia's banana export industry.

On January 17, 2007, new port and airport directors were appointed by the TFG.[17 ]

Somali exports in 2006

Telecommunications

Somalia has some of the best telecommunications in Africa.[18] Installation time for a land-line is just three days, while in the neighboring Kenya waiting lists are many years long.[13] This may seem rather unexpected in a country engaged in civil war; the public telecommunications system was destroyed or dismantled at the outset of the civil war by different factions. Abdullahi Mohammed Hussein of Telecom Somalia explained this by that "the government post and telecoms company used to have a monopoly but after the regime was toppled, we were free to set up our own business",[19] The Economist cited the telephone industry in anarchic Somalia as "a vivid illustration of the way in which governments…can often be more of a hindrance than a help."[20] Somalia is linked to the outside world via ship-to-shore communications (INMARSAT) as well as links to overseas satellite operators by private telecommunications operators in major towns. Wireless/mobile communications has also become an economic force in Somalia. Somalia has the cheapest cellular calling rates on the continent, with some companies charging less than a cent per minute.[21]

Radio broadcasting stations operate at Mogadishu, Hargeisa, and Galkayo, with programs in Somali and some other languages. There are two television broadcast stations in Mogadishu and one in Hargeisa.

Sanctions by the US in 2001 in the wake of the 9/11 attacks due to suspicions of terrorist funding set back Somali Internet development.[22 ] Internet usage still continues to climb due to Internet cafés. From 200 users in all of Somalia in 1999[23 ], the number of users has grown to an estimated 90,000, or 11 persons per 1,000 in 2005, according to the ITU. The shared use of computers can be inferred by the lower estimate of 50,000 PCs in the country, for a ratio of about two users on average for every computer. [24]

Financial sector

A money exchange center in Hargeisa, Somalia. In the absence of a formal banking sector, money exchange services have sprung up throughout the country, handling about $1 billion in remittances annually.

Rival producers of Somali shillings emerged after 1991. These included the Na shilling, which failed to gain widespread acceptance, and the Balweyn I and II, which were forgeries of pre-1991 bank notes. A competition for seigniorage drove the value of the money down to about $0.04 per SoSh (1000) note, approximately the commodity cost. Consumers have refused to accept bills larger than the 1991 denominations, which has helped stopped the devaluation from spiraling further. The pre-1991 notes and the subsequent forgeries are treated as the same currency. It takes large bundles to make cash purchases.[13] United States dollar is often used for larger transactions.[13]

The relatively stable value of the currency in the 1990s compared to the 1980s is explained by Peter D. Little in Somalia: Economy without a State as resulting from the lack of a corrupt central government printing currency to pay for military expenditures and political cronies.[25] Traders avoid the need to carry large amounts of Somali shillings by converting them to U.S. dollars and then wiring them to money houses in Somalia. Because identification can be easily forged, those seeking to pick up wired money are required to answer questions about their clan and kinship relations. Private remittance companies known as hawala assist in the transfer of money.

Remittance services has become a large industry in Somalia. Successful people from the worldwide diaspora who fled because of the war contribute to the economy around $1 billion annually. [26] In the absence of a formal banking sector, money exchange services have sprouted throughout the country, handling between $500 million and $1 billion in remittances annually. Due to the war, the actual size and growth rate of the economy is unknown.

Construction

Construction is sporadic, and at times heavily subsidized by foreign aid agencies. Projects, such as the UN WFP program to repair the air strip in Bardheere, are resuscitating infrastructure, homes and commercial sites that have laid in ruins for years or decades. [27] Some construction projects were begun under the Islamic Courts Union (ICU) in 2006, including re-opening the Mogadishu port and airport.[28 ]

Energy and utilities

Electricity is furnished by entrepreneurs, who have purchased generators and divided cities into manageable sectors.

Petroleum exploration efforts, at one time under way, have ceased due to insecurity and instability. There are no proven oil reserves, but there are prospects to explore for oil in Puntland. Due to political instability and the protests of the Transitional Federal Government foreign investors are warned to not make deals until stability is restored. [29] Production in the south of charcoal (as a biomass fuel) for export has led to widespread deforestation.

The private sector also supplies water. A report by WHO/UNICEF indicated that in 2004 only 29% of the population had access to safe drinking water.[30 ]

Corruption

The owner of Daallo Airlines says, "Sometimes it's difficult without a government and sometimes it's a plus," but "Corruption is not a problem, because there is no government."[16][31] However, Transparency International's annual surveys indicate that Somalia is perceived as having extensive corruption, with Somalia rated at or near the highest level of corruption in the world in most years.[32]Whether the situation has improved since Siyad Barre's governance, which allegedly featured some of the worst corruption in all of Africa, is open for interpretation.[33] A more recent 2008 report rated Somalia as one hundred-eighty on a corruption scale.[34]

Statistics

Given the lack of central government, these statistics should be viewed as best estimates:

GDP: purchasing power parity - $4.809 billion (2005 est.)

GDP - real growth rate: 2.4% (2005 est.)

GDP - per capita: purchasing power parity - $600 (2005 est.)

GDP - composition by sector:
agriculture: 65%
industry: 10%
services: 25% (2000 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): note - businesses print their own money, so inflation rates cannot be sensibly determined (2003 est.)

Labor force: 3.7 million (very few are skilled laborers)(1993 est.)

Labor force - by occupation: agriculture (mostly pastoral nomadism) 71%, industry and services 29%

Unemployment rate: NA%

Budget:
revenues: $NA
expenditures: $NA, including capital expenditures of $NA

Industries: a few light industries, including sugar refining, textiles, petroleum refining (mostly shut down), wireless communication

Industrial production growth rate: NA%

Electricity - production: 235.6 GWh (2003)

Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 219.1 GWh (2003)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: bananas, sorghum, maize, rice, sugar cane, mangoes, coconuts, sesame seeds, beans; cattle, camel, sheep, goats; fish

Exports: $79 million f.o.b. (2002 est.) according to CIA
~$265 million according to IMF [35]

Exports - commodities: livestock, bananas, hides, fish, charcoal, scrap metal

Exports - partners: UAE 37.2%, Yemen 22.3%, Oman 10.1%, China 6%, Kuwait 4.4%, Nigeria 4% (2003)

Imports: $344 million f.o.b. (2002 est.)

Imports - commodities: manufactures, petroleum products, foodstuffs, construction materials, khat

Imports - partners: Djibouti 33.9%, Kenya 15.5%, Brazil 6.6%, UAE 5.1%, Thailand 4.2% (2003)

Debt - external: $2.6 billion (2000 est.)

Economic aid - recipient: $60 million (1999 est.)

Currency: Somali shilling (SOS)

Exchange rates: Somali shillings (So. Sh.) per US$1 – 2,620 (January 1999), 7,500 (November 1997 est.), 7,000 (January 1996 est.), 5,000 (1 January 1995), 2,616 (1 July 1993), 4,200 (December 1992)
note: the Republic of Somaliland, a self-declared independent country not recognized by any foreign government or international organization, issues its own currency, the Somaliland shilling (So. Sh.)

Fiscal year: NA

See also

References

  1. ^ a b c CIA - The World Factbook - Somalia (2008)
  2. ^ Kingfisher Geography encyclopedia. ISBN 1-85613-582-9. Page 198
  3. ^ Thomas R. Yager. "The Mineral Industry of Somalia". 2006 Minerals Yearbook. U.S. Geological Survey (August 2007). This article incorporates text from this U.S. government source, which is in the public domain.
  4. ^ Nenova, Tatiana; Harford, Tim (November 2004). "Anarchy and Invention". Public Policy for the Private Sector (280). http://rru.worldbank.org/Documents/PapersLinks/280-nenova-harford.pdf. Retrieved 2008-03-10.  
  5. ^ "Country Re-Engagement Note". World Bank Advisory Committee for Somalia. 2003. http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/03/25/000112742_20040325090551/Rendered/PDF/282760Somalia0Country0reengagement0note.pdf. Retrieved 2005-11-04.  
  6. ^ "The Somali Democratic Republic". UN Office for the Coordination of Humanitarian Affairs. http://www.irinnews.org/country.aspx?CountryCode=SO&RegionCode=HOA. Retrieved 2007-10-03.  
  7. ^ "Somalia". CIA Factbook. CIA. 19 December 2006. https://www.cia.gov/library/publications/the-world-factbook/geos/so.html#Econ. Retrieved 2007-01-02.  
  8. ^ http://mises.org/story/2701
  9. ^ "The Somali Democratic Republic Humanitarian Country Profile". UN Office for the Coordination of Humanitarian Affairs. May 2008. http://www.irinnews.org/country.aspx?CountryCode=SO&RegionCode=HOA.  
  10. ^ CIA World Factbook: Somalia (1995)
  11. ^ CIA World Factbook: Somalia (2003)
  12. ^ a b CIA World Factbook: Somalia (2006)
  13. ^ a b c d Benjamin Powell, Ryan Ford, Alex Nowrasteh (November 30, 2006). "Somalia After State Collapse: Chaos or Improvement?". http://www.independent.org/pdf/working_papers/64_somalia.pdf.  
  14. ^ "Food Security Analysis Unit: Somalia livestock". Food Security Analysis Unit. http://www.fsausomali.org/index.php@id=39.html.  
  15. ^ Ferrett, Grant (6 July 2004). "Coca-Cola Makes Somalia Return". BBC News. http://news.bbc.co.uk/2/hi/africa/3865595.stm. Retrieved 2007-01-02.  
  16. ^ a b Africa Open for Business, World Bank, March 18, 2005.
  17. ^ "TFG finalizing establishment of gov’t bodies, appoints directors for Mogadishu, Kismayo airports". Ethiopian Herald. 2007-01-17. http://www.ethpress.gov.et/Herald/articleDetail.asp?articleid=60626. Retrieved 2007-01-17.  
  18. ^ Sites, Kevin (2007). In the Hot Zone. New York: Harper Perennial. ISBN 9780061228759.  
  19. ^ Winter, Joseph (2004-11-19). "Telecoms thriving in lawless Somalia". BBC News Africa (British Broadcasting Corporation). http://news.bbc.co.uk/2/hi/africa/4020259.stm. Retrieved 2007-10-03.  
  20. ^ "Somalia calling: An unlikely success story". The Economist. 2005-12-20. http://www.awdalnews.com/wmview.php?ArtID=6661.  
  21. ^ Winter, Joseph (2004-11-19). "Telecoms thriving in lawless Somalia". BBC. http://news.bbc.co.uk/2/hi/africa/4020259.stm. Retrieved 2007-01-02.  
  22. ^ "US shuts down Somalia internet". BBC. 2001-11-23. http://news.bbc.co.uk/2/hi/africa/1672220.stm. Retrieved 2007-01-17.  
  23. ^ "Somalia: Internet Connectivity". NUA Internet Surveys. 1999-10-04. http://www.uneca.org/aisi/NICI/country_profiles/Somalia/sominter.htm. Retrieved 2007-01-17.  
  24. ^ "ITC Statistics Database: 4. Internet indicators: Hosts, Users and Number of PCs". ITU. http://www.itu.int/ITU-D/icteye/Indicators/Indicators.aspx#. Retrieved 2007-01-17.  
  25. ^ Peter D. Little. Somalia: Economy without a State.  
  26. ^ "SOMALIA: Remittances - a lifeline to survival". IRIN. 2005-05-18. http://www.irinnews.org/S_report.asp?ReportID=47162. Retrieved 2007-01-17.  
  27. ^ "Somalia: UN WFP helps the construction of airport landing strip in Gedo province". Shabelle Media Networks. 2006-10-12. http://www.shabelle.net/news/ne1558.htm. Retrieved 2007-01-17.  
  28. ^ "Peaceful Somalia Attracts Investors". http://saylac.com/news/warkanov,02,2006.htm. Retrieved 2007-01-17.  
  29. ^ "Abdillahi Yusuf’s Transitional Government And Puntland Oil Deals". Somaliland Times. http://www.somalilandtimes.net/196/10728.shtml. Retrieved 2007-01-10.  
  30. ^ "MDG assessment report (2006)". WHO/UNICEF. http://www.wssinfo.org/en/40_MDG2006.html. Retrieved 2007-01-18.  
  31. ^ Africa Open for Business - Somalia on Youtube accessed at April 22, 2008
  32. ^ http://www.transparency.org/policy_research/surveys_indices/cpi
  33. ^ True News 18: Somalia on Youtube accessed at January 31, 2009
  34. ^ http://www.transparency.org/policy_research/surveys_indices/cpi/2008
  35. ^ International Monetary Fund - Data and Statistics - BOP, DOT & IFS Data Browsers

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