Thursday, March 12, 2015
Somalia’s economic recovery is finally getting into shape. The country now requires true economic partners that can increase its export volumes. Somalia requires real partners who can sustain its economic growth and development. It requires an expansion of the few existing markets, and creation of new ones. The country’s economy is in dire need of a true trade partner.
Most developed nations have economic intentions towards Africa. This intention is based on exploitation of natural resources that can be used as an input for their growing industrial demand. Finished products are then exported back to Africa at a premium price. Examples include oil, gas, coffee, cocoa and timber. All these are Africa’s iconic products for global use.
There is demand too, in the developed world, for such products. Why don’t African countries process, package and export these products? The answer is simple. There are restrictions on African goods to the international markets. To make the matter worse, many African leaders do not negotiate market restrictions and export agreements.
To respond to this growing concern among many African elites, the US, for instance, initiated the African Growth and Opportunity Act (AGOA), which was signed into law on May 18, 2000 as Title One of The Trade and Development Act of 2000. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets.
Today, these countries have benefited less. Somalia is not part of that opportunity, and cannot therefore access the US market in the same manner other members can. The US may not have any trade agreement with Somalia, but there is $15 million trade value between the two countries. About 75 per cent of this trade is as a result of goods imported from the US. Somalia has only about $5 million worth of export of goods to the US.
Since the year 2010, the Turkish government and its people have shown remarkable interest in Somalia’s economy. Many Turkish companies have set up shop in Somalia. Although most imported products and services from Turkey are costly compared to those from the Far East, penetration rate is picking up unexpectedly.
Most Turkish companies in Somalia are engaged in aviation, construction, education, health and management of public economic institutions, such as Mogadishu port and Airport. This is done in partnership with the government of Somalia. Besides, there are other hundreds of companies that are engaged in other productive economic sectors. In this scenario, there is imbalanced trade flow between Somalia and Turkey. This does not mean Somalia has nothing to offer for export to Turkey.
The setback is that the Turkish market is not yet open for Somalia products and services. Somalia can export a wide range of products to Turkey, most notably dairy and agricultural products. Considering the geo-political shift and diplomatic deadlock between the European Union (EU) and Russia, Turkey today is the gateway for the Russian market. It supplies almost all basic agricultural products to that market. Turkey outsources this supply and Somalia could be one of the significant trade partners in this regard.
Asian economic powerhouses are also other significant potential markets for Somalia. However, market limitations and the absence of bilateral agreements are hampering the export industry growth. Marine, fisheries, honey, fruits, timber, and livestock, are all significant products that can be exported from Somalia to the Far East.
Another traditional but key market for the Somalia economy is the Middle East. Somalia has traditional trade partners in the Middle East when it comes to livestock and fruit exports. Most notable partners are Saudi Arabia, UAE, Kuwait, Qatar and Oman. These are key livestock markets for Somalia. There are no formal bilateral trade agreements between Somalia and such countries.
However, pricing and demand and supply factors have made export conditions favourable for Somalia. In summary, the international community spends huge amounts of funds to humanitarian and emergency responses in Somalia every year. The full impact is yet to be felt on the ground. Is it wise to keep applying the same old humanitarian approaches in supporting Somalia, which gives the same results? Shouldn’t other productive approaches be explored?
Boost Economic Systems
One of the key successful approaches in securing and building back a collapsed system of governance,such as in Somalia’s case, is to boost economic systems.This could be achieved by opening international markets to produce and services in order to support foreign exchange earnings, creating more jobs,and finance significant portion of the national budget.
And even if we forget for a while the difficulties Somalia is encountering in finding export markets for its produce, there are also significant restrictions of outbound parcels and documents through couriers such the DHL and others. They only service inbound parcels and documents – a clear sign of making the Somalia’s economy more import dependant. Somalia’s foreign ministry has to develop a policy framework that allows it to join regional and global economic blocks.
Somalia is not a member state of The Common Market for Eastern and Southern Africa (COMESA). With a population of 390 million, an annual import bill of around $32 billion and an export bill of $82 billion, the 19-country COMESA forms a major market place for both internal and external trading. Somalia is not a member state of East African Community (EAC) either. The 130-million plus population economic block is a significant market that Somalia should keep an eye on.
All these economic bodies offer markets and opportunities for Somalia. Expeditious efforts should be made to tap these opportunities in order to promote Somalia’s export. Besides efforts to improve security, Somalia has to focus on economic recovery as well. Its economy requires export to balance out with the growing import economy.
An economy with a 10-90 per cent export-import imbalance, Somalia seriously needs to review its foreign policy in line with its economic recovery agenda. Somalia does not need humanitarian fund or aid. It needs markets for its produce.