The interesting turnaround in the economic situation of Somalia as a country torn by civil war is a good indicator of how an economy can still move on even in the absence of a centralized. However, the latter is not always advisable especially since it is also the main reason why Somalis have to start everything from scratch particularly in establishing the rights to education, food security, livelihood, and others.The lack of legitimate government is also the main reason why several extremist groups are free to roam around certain territories and continue to disturb the peace of innocent civilians since the former are confident that they have every chance to dominate power over such a vulnerable nation where the citizens live in fear and lack of security.The history of Somalia however, can provide several important especially when it comes to economy, particularly that it can go on without the usual regularities although it poses great risk.
Therefore the important question to deal with is to what extent can a business venture go without the government’s interference?But given Somaliland’s crisis, it is still important that government policies are created as means of protection for its people. What happened to Somalia’s surprising economy survival was not sheer luck but a consequence of the need of its people to live and move on after being deprived by dictatorship and other forms of injustice.The following discussions will indicate a historical blunder made by head-strong political figures who prioritized their own interest instead of the people’s will which lead to devastating consequences being suffered until now.This will be followed by an overview of the current economic situation of Somalia particularly its struggle with economic growth, poverty and the livelihood of citizens amidst the current issues of conflicts and political aggression that is preventing a stable economy from taking place.Somalia’s way to recovery is no easy task that many foreign countries and organizations like the United Nations are doing their part to bring the nation back to its feet. A series of programs formulated by the United Nations is also presented not only to show the real issues behind the delay to Somaliland’s recovery but as well as the possible methods that can be adopted which can also be applicable to recovering countries like Somaliland.
Lastly, there will be a significant discussion as to what kind of policies are applicable to this nation as well as why it is still important to create policies despite the fact that Somalia was able to exist with an enterprising economy despite the lack of a centralized government.Historical BackgroundThe African nation of Somalia which is popularly known as the “Horn of Africa” is located east of the continent and north of the Equator. It currently seeks independence from “Italy's former Trust Territory of Somalia and the former British Protectorate of Somaliland.” Its natural features are comprised of hilly landscapes on the northern part while flat terrains dominate the central and southern regions.
Native inhabitants of this country are known as the Cushitics who are comprised mainly of Muslim population. This was due to Arab and Persian influence which initially was a result of ancient trading dating back from seventh century A.D. until the latter group finally decided to settle at the said location.The Somalians victoriously gained independence in the 1960’s as granted by the UN General Assembly.
This symbolized the unity of its people, but unfortunately also created tension with neighboring countries like Kenya, Djibouti, and Ethiopia which has been in conflict with Somalia since the 16th century.At present, an approximated 60% of the Somali population is “nomadic or semi-nomadic pastoralists who make a living by raising farm animals while 25% are farmers with their own homes settling in southern Somalia, and the remaining percentage are those living in towns (Background Note: Somalia, 2010).Economic Situation and IssuesSomalia’s reported gross domestic product was estimated at “U.S. $5.524 billion in 2008.
” It is sad to note that a series of exploitation and illegal activities with regard to its natural resources continues to affect the country’s already struggling economy.Just like the recently-earthquake-stricken nation of Haiti, Somalia has become strongly dependent on financial assistance from countries like the United States. Most of its people rely on farming particularly with the cultivation of products like “banana, corn, sugar, etc.” Herding of animals such as “camels, cattle, sheep, and goats” is also a common source of livelihood although it has been greatly affected as a means of exchange due to contamination issues.Drought and inadequate rainfall which is a common feature in Somalia’s weather is also a liability to its agriculture despite the utilization of “modern irrigation systems and up-to-date machinery” (Background Note: Somalia, 2010).
The fishing industry also contributes as a source income particularly in the production of “tuna, shark and other warm-water marine life” but many legitimate fisheries have to deal with thievery.Other products for export like the historic frankincense and myrrh are also in danger of being lost as they being harvested from a “small and diminishing forest.” Somalia could not be underestimated as it is found to have been a source of rich mineral deposits like “uranium, petroleum and natural gas,” but the nation’s lack if security and stability puts hindrance in exploring these untapped resources which could have been a significant solution to a solid growth of an independent economy.Charcoal is another export product but lack of regulation and security as well has allowed illegal miners to the destruction of Somalia’s forests. For now, the citizens of Somalia do not have much choice but to rely on foreign subsidies and settle with running small business related to “textiles, handicrafts, meat processing, and printing.”Landline communication systems are also disrupted although cellular phone services are functioning.
Even the country’s legal tender, “the Somaliland shilling,” is not spared by exploitation and forging due to lack of centralized government in the country. The degraded currency is therefore not recognized outside the country (Background Note: Somalia, 2010). These are only a glimpse of Somali’s struggling economy.Much of Somalia’s developing economy is also due to the benefits brought by remittances companies in facilitating money transfers. The transfer of funds which range approximately from $50 to $100 dollars makes everyday life smooth flowing for ordinary family members in supporting their education and health needs.
Investors also benefit from remittances albeit on a lesser level, however lately there has been an increasing demand for remittances in financing newly established organizations and other business ventures. It has also aided significantly during emergency needs during fortuitous events like “calamities, drought, livestock bans, and conflicts between clans which are common in Somalia.” (Maimbo , 2006, page 7)An Overview of Economic Growth, Poverty and Income DistributionAccording to author and analyst Dr. Jamil A. Mubarak (2006), Somalia’s market is currently characterized by a transition from its “old economy” which has been characterized earlier such as that of the pastoral and nomadic way of living by some of its people who rely on herding of animal farms.This, according to Mubarak, is not a very suitable strategy in pursuing a steady economic growth since it will only lead to “poverty and decline.
” Also, because of the fact that Somalia did not have a centralized government to protect its citizens from any irregularities, a series of trials and errors in the past decades have made matters worse therefore the country is still keeping up with globalization.However, despite this shortcoming from the government, there is also a more promising “new economy” at hand through the help of the “private sectors” who initialized the “free market” in 1991.Entrepreneurs were allowed to “trade, invest, and operate” freely without government intervention to be imposed on them such as tax regulations and “price controls” (Murphy, 2010). This paved the way for many advantages like transforming Somalia’s backward economy to a more advanced one with its people benefiting from up-to-date technological knowledge and good source of income through employment which will sustain them in providing food for their family.
It also improved trade products with prices that are competitive enough in the world market (Mubarak, 2006).With these facts, revenue allotment is strongly possible especially since the World Bank itself has confirmed that Somalia is in a much better position to recover as compared with neighboring countries in Africa in terms of “economic potential and infrastructure” as long as it can focus on its assets and finally be able to achieve its ideal government (Somalia Economy, 2010). Another important thing to consider according to World Bank is to “maintain high rates of savings and investment” for the continuous shore up of countries like Somalia (Brahmam, 2008). Before the civil war, studies revealed that the southern region of Somalia and its capital Mogadishu were prosperous as the benefits of “commercial agriculture” were focused in these areas. Interestingly, the studies also revealed that areas with lesser conflicts earn better income compared with those that are struggling with the peace process, although this information is still undergoing further analysis (Somalia: Socio Economic Survey, 2002, page 23).One of the origins of Somaliland conflicts was the upheaval of Islamic organizations after the nation’s independence in 1960’sas the group expressed concerns that their rights might be undermined by the rising influence of the western culture.
Three recognized movements emerged namely the “Al-Islah, Al-Ittihad, and Al-Tablig as well as other minor activists” and it was very stressful for the terrorized economy since the groups have different demands (Abdullahi, 2010, pages 6-5).Figures also provide that there is a strong indication of inequality when it comes to the distribution of household income as figures reveal that “30 percent of the country’s population is only receiving 7.8 percent of the country’s total earnings.Furthermore, almost 50 percent of its populace is also living under extreme poverty, or those earning less than one US dollar per day measured at purchasing power parity (PPP) for international comparisons and aggregation (Somalia: Socio Economic Survey, 2002, page 23). Therefore basing on these figures, the United Nations came up with its Millennium Development Goal of reducing up to 50 percent the number of Somalians living under extreme poverty by the year 2015 with the formulation of programs that will reduce poverty.An increase in international subsidy is also considered of great advantage to this endeavor as well as the creation of a “large-scale, multi-sectoral development program.” Moreover, there is also a call to continuously monitor and collect data concerning poverty especially its relation to existing conflicts between different Somali groups in order to properly address any existing issues from which remedies can be determined (Somalia: Socio Economic Survey, 2002, page 24).
