Somalia: A Country Report

Justin Peng

Introduction:

Somalia is arguably one of the most unstable and most volatile nations in the world. Sporting a near-anarchic society, pirates as upper-class people, and constant fighting, Somalia is in no position to begin any form of development. However, Somalia is not landlocked, in fact, it is near the northeast point of Africa and is near the Gulf of Aden, one of the most popular trade routes worldwide. In short, Somalia holds potential to become a developed country near a popular trade route; however, its shortcomings severely hinder its chance of development. At the moment, Somalia is a LEDC due to various hindrances and a lack of development.

Background Information:Somalia’s history has been a great contributing factor to its current

economic instability. The conflict started in 1991, when President Barre, who had proclaimed a socialist nation to enhance relations with the USSR, was overthrown by opposing clans in Somalia. However, the clans could not agree on a replacement for the president, and instability and warfare erupted in Somalia. After 9 years of internal warfare, Somalia attempted to elect Abdulkassim Salat Hassan as the president in a traditional governmental system, however, due to previous instability even this was not able to unite the country. Somalia was already divided into various clan territories, and was much too difficult to unite.

In 2006, even more events fueled Somalia’s instability. The Al-Shabab, an extremist Islamic insurgency group, began to move into Somalia in an attempt to turn it into an Islamic nation. The Al-Shabab declared allegiance to Al-Qaeda, and fought against the governmental forces within Somalia. The Al-Shabab began to take over various strongholds in Somalia, and slowly, the country succumbed to their advances. Now, most of the southern and central parts of Somalia, as well as chunks of Mogadishu, the Somali capital, are under Al-Shabab control. This caused the southern part of Somalia to become ruled by warlords, which in turn, caused development to halt in the area, seeing as how the warlords usually governed for self-gain.

Effect of Political Stability on Somalia’s Economy:Currently, Somalia lacks a stable government, seeing as how the country

is still divided into clan territories and the Al-Shabab are attempting to overthrow the government and take over. In its current situation, Somalia has too many problems to deal with, and cannot focus on development itself. The various problems in Somalia have lead to the development of other problems in a vicious cycle, which pose a severe hindrance to its economic growth. Without stability, the government is unable to focus on investing in infrastructure, health care, or other basic needs of the people. In fact, Somalia is unable to mine and process some of its valuable, however lacking resources, or utilize the Gulf of Aden to the fullest. Without a stable government, Somalia will be unable to regulate the needs of its people or economy properly, and will continue to suffer in its cycle of hindrance of growth.

The Al-Shabab Logo

This instability also has a direct impact on human resources as well. The life expectancy of Somalia is extremely low due to the constant fighting, and due to this, parents are forced to raise multiple children to ensure that one will survive to adulthood. The instability also causes a vicious cycle of poverty, where the country has no way to help develop industries or factories and other such aspects of a working economy. Therefore, the people stay poor without a suitable job or facilities to assist them in their current work, and the country is unable to develop further.

Without a powerful governing force, Somalia cannot decide what to which resources to process, which industries to develop, and other such factors of

economic development. Due to this, it is impossible to fuel the economy or break the vicious cycle of poverty, since without a governing force, people lose aim on what to do and resources are not allocated properly. The political instability has caused Somalia’s development to come to a standstill, and is probably one of the biggest factors contributing to Somalia’s

hindered development.

Resources: Somalia lacks useful natural resources as well as means to process them.

However, Somalia has a huge amount of human resources, which is a characteristic of LEDCs.

Somalia’s natural resources include uranium, reserves of iron ore, gypsum, tin, bauxite, salt, natural gas, bauxite, and a high potential for oil reserves. Somalia’s natural resources are somewhat lacking when compared with the rest of the African nations, however, like most African nations, Somalia also lacks the capital resources to process their limited natural resources. The Gulf of Aden can also be considered as a natural resource, and being one of the most useful trade routes in the world, can benefit the Somali economy immensely. The Gulf can be used as a great “trade station”, where goods could be easily exported via shipping, or imported via shipping. However, a lack of capital resources as well as governmental guidance severely damages the likelihood of this happening, as Somalia currently has nearly no way to process their natural resources and export them, and is much too poor to begin importing a satisfactory amount of goods.

Somalia has very few capital resources. Somalia only has a few light industries, including industries such as food processing, textiles, and sugar refining. However, all the parts needed to assemble these factories were built by foreign nations and imported into Somalia, and therefore, when a part of a factory broke down or needed repair, new parts had to be ordered from the original foreign sources. This was extremely expensive and difficult to afford, and slowly, many of the factories would fall into ruin. In fact, the demand for the

Sharif Ahmed, Somalia’s current president

spare parts was higher than the supply in Somalia due to this, and Somalia lacked the resources to create these spare parts on their own. Therefore, they had been stuck trying to import various expensive parts for factories and being unable to afford them financially. At the same time, despite a strategic location near the Gulf of Aden, Somalia only has one port and one merchant marine ship. Therefore, it not only lacks capital resources to process its own natural resources, but Somalia also lacks capital resources to transport anything produced in the country. Somalia needs to begin developing more capital resources in order to sustain its own economy on its own.

Tying into the capital resources, Somalia has no data on its industrial production growth rate. This ties in directly with the lack of capital resources and a lack of development; the government is too unstable to find the statistics for the growth rate, and the country itself lacks the resources to grow in the first place.

Despite lacking in natural and capital resources, Somalia has plenty of human resources. Somalia sports an extremely high population growth rate, with a large chunk of the population being aged from 0-14 years old. In fact, children from the ages 0-14 make up 45% of the population, people aged from 15-64 make up 52.6% of the population, and the elderly people that are aged above 65 make up 2.5% of the population as of 2010. As can be clearly seen, Somalia has a positive growth rate, and in fact, it is escalating at quite a rapid rate. This is a commonly seen phenomenon in LEDCs, where the infant mortality is much too high and parents will attempt to have more children that will take care of them in the future. In fact, Somalia has an infant mortality of 107.42/1,000, or about 1/10. That would mean that infants would have a 1/10 chance to die. This ties in with the abundance of human resources; parents, wanting their children to survive, would have more children and in turn, Somalia would have a larger pool of human resources.

The current fighting going on within the country, the poor health care, the abundance of dangerous diseases, the lack of infrastructure, and the lack of adequate basic needs of people directly affects the high mortality rates. These high mortality rates would in turn, encourage people to reproduce, which would add to the pool of human resources within the country. Therefore, Somalia displays a characteristic of an LEDC, since the living standards are poor and contribute to a high mortality rate, which in turn, causes people to have more children in an attempt to have at least one of them survive. At the same time, the high mortality rate ties directly back to the political instability. It is because of this instability that the Somali people cannot have access to their needs of survival, and the instability is also what is causing the constant fighting. This would in turn, cause more deaths, which would cause people to have more children.

Somalia’s human resources are primarily allocated to agriculture at the moment. In 2005, 65% of Somalia’s GDP was derived from agriculture, 10% was from industries, and 25% was from services. This is a commonly seen phenomenon in LEDCs; most people work in agriculture in many different LEDC nations because they lack the education and knowledge to move towards skilled labor. This lack of knowledge is further proved by Somalia’s literacy rate, which only has 37.8% of the population above the age of 15 being able to read and write. This creates a horrible cycle where without proper education; future generations cannot help fuel the economy with their knowledge. Therefore, they turn to agriculture or other labor that doesn’t involve knowledge-based activities, which in turn, hinders the development of a nation.

Relating to the GDP-composition by sector, Somalia’s workforce is primarily agriculture with a few people working in industries and services. The various jobs that the labor force comprises of, as of 1975 is 71% working in agriculture, and 29% working in industries or services. Again, this is a very common trait in an LEDC; most people work in agriculture. Therefore, the majority of the income to the GDP is also agricultural because with more people working in agriculture, it is natural to have more income based on agriculture.

Somalia has a lack of natural resources and capital resources, however, is quite abundant in human resources. This is a huge characteristic of most LEDCs, and supports the theory that Somalia is an LEDC.

As can be clearly seen, Somalia has a large young population. Due to more people dying as they age, since Somalia has a life expectancy of 50 years old, the younger generations seem to dominate most of the population. The pyramid is a triangle, which represents positive population growth.

79%

21%

Labor Force Occupation as of 1975

AgricultureIndustries and Services

65%10%

25%

GDP-Composition by Sector

AgricultureIndustriesServices

Entrepreneurship:Somalia and its people have engaged in entrepreneurship various times

throughout the country’s development. One very current example of entrepreneurship is the Somali pirates.

Looking for more income to feed and support their families, some Somali people turned to hijacking ships and holding their crews hostage for ransom money. This ransom money was usually very expensive, and therefore, by simply hijacking a ship and threatening the lives of the crewmembers, the pirates would earn a lot of money in a short amount of time. At the same time, Somalia’s positioning in Africa was ideal for the pirates; the Gulf of Aden is a popular trade route and the pirates could easily hijack passing ships. The pirates now make up the upper class of the Somali economy, as well as fuel the economy itself by buying more goods due to having more money, or a greater purchasing power. Therefore, these entrepreneurs succeeded; being pirates brought a much higher wealth than being a simple farmer or other jobs they may have attempted beforehand. By trying this new way to conduct business, the pirates were able to earn more money than other people in Somalia.

Back in 2008, the Somali government attempted to implement a new program to combat the problem of being unable to afford parts for machinery in order to enhance Somalia’s economy. This plan primarily involved hiring professional consultant Engineers as well as foreign consultants to discuss what to export and import as well as keep the factories intact. At the same time, Somalia would sign agreements with corporations around the world to have them donate parts to build factories with, so that they could start fresh. However, this entrepreneurship seems to have failed, since as of now, Somalia has not had an increase in GDP or its undocumented industrial production growth rate. Therefore, it can be concluded that despite attempts to implement this policy, the entrepreneurship has failed because it did not bring economical development.

These attempts at entrepreneurship point towards Somalia being an LEDC because the people were so poor they were forced to turn to piracy, and the government was unable to implement simple policies to stimulate their economy. At the same time, this again ties in with Somalia’s governmental instability. Since without an influential government, Somalia is almost law-free, the pirates do not have to fear the law. At the same time, the inability to implement new ways to improve the various industries in Somalia is a direct result of being powerless to do anything as a government.

GDP per Capita and Inflation:Somalia’s GDP per capita is another statistic that points at Somalia being

an LEDC. Despite having no data on GDP per capita for 2010, from 2006-2009

The hijacked MV Faina had its crew held hostage back in 2008

Somalia’s GDP has been consistently at $600. This can be interpreted as both good, and bad. On the plus side, the GDP is unchanging, and therefore, the economy hasn’t gotten any worse. On the bad side, however, the GDP is still incredibly low and is 226th place when compared to the rest of the countries of the world, and it is not growing. This is another characteristic of an LEDC, and illustrates the vicious cycle of poverty. Since many LEDCs struggle trying to help their people to reach above the poverty line, this shows that struggle. Somalia’s inability to educate its people for skilled labor, as well as inability to fuel the economy is taking its toll in the form of GDP per capita.

Somalia currently has no data on its inflation. This further illustrates the current instability in the country, and how it is definitely in no position to develop. The government was not present and ready to document the simple inflation of the Somali currency. This further contributes to the argument that Somalia is an LEDC; Somalia cannot develop due to its current position.

Economic Freedom:Somalia is not ranked based on its economic freedom due to the unstable

government being unable to measure it. At first glance, Somalia may seem very economically free. The government holds nearly no power over the people, and due to this, people and corporations can essentially do whatever they please. However, this is a misconception; Somalia does not fit quite a few of the criteria for economic freedom in the first place such as property rights, and therefore, even if it was measured, Somalia’s economic freedom would be quite low. However, without the laws and regulations binding countries, they still can do essentially whatever they please.

This problem is another sign of being an LEDC; the lower your economic freedom, the harder it is to import and export goods. At the same time, this shows Somalia’s lack of development; it does not have rules and regulations and other laws that can help the country develop. This again, ties right back to political instability. Somalia’s lack of government control causes a loss of many laws and regulations that most countries usually already have implemented, and due to this, have a hindered economic freedom.

Conclusion:Somalia is currently in a grave position. Due to political instability and a

lack of natural and capital resources Somalia is currently finding it nearly impossible to develop. Somalia shows many telltale signs of being an LEDC such as having most of its workforce working through agriculture, as well as a low GDP per capita. At the root of Somalia’s problems, is its unstable government. Once a stable government is established, plans on entrepreneurship for the development of the economy can be made. With the proper guiding force, Somalia can finally begin to develop properly, and when it does, it has the

The Somali shilling, Somalia’s current currency

potential to become an influential world power. With the Gulf of Aden at Somalia’s disposal, a developing or developed Somalia can prove to be vital to the world’s shipping industry. Somalia’s future is still unclear, however, seems like a bleak prospect at the moment. At the moment, the road to economic development seems extremely far, seeing as how now the nation is split apart by fighting. With the Al-Shabab entering, there is nearly no way for Somalia to organize and care for its people.

Somalia has many fundamental problems it must solve first in order to achieve a satisfactory level of development. Firstly, the Al-Shabab must be dealt with in some way, as they only contribute to the political instability. Secondly, Somalia must install a stable governmental system that actually holds true power within the country and one that can restore law and alienate the current chaotic situation. Finally, Somalia can then work on educating its people to achieve skilled labor, and at the same time, begin to provide its people with the proper necessities of life. Somalia may be in dark times today, however, there is always hope for the future. Somalia must keep trying to find a solution to its current predicament, however bleak it may seem. In order to develop, Somalia will need a lot of support; since it lacks resources itself and is stuck in a cycle it cannot break free from. Somalia’s development will not be an easy task; it is simply too volatile and chaotic at the moment to develop. It is far from even starting to develop at the moment, and is starting out quite badly compared to many other LEDCs around the world. However, with the right support and implementations of policies, which move towards political stability will be highly beneficial to Somalia. Once political stability is restored, further steps to empower the country must be taken. Without a stable government, Somalia is unable to make any important decisions, and is stuck in chaos. However, the second a government is established, order will return.

The heart of Somalia’s problem is simply its instable government, and no matter how hard it is to fix, Somalia must try if it intends to develop for the betterment of its people. People in Somalia must take action and work together to create a better future for the generations to come. If Somali warlords and other such groups that refuse to give up control over their small regions could set aside their differences and work together, Somalia may be able to implement a stable government. The second this happens, Somalia will be well on its way to development, and as long as the government does will, it will progressively fix many current problems. There is still hope for Somalia, and it should do well not to lose it. Rather than give in to the chaos that unfolds, Somali people should embrace their differences and work together. Together, they can drive out the Al-Shabab, improve their industries, and process their natural resources. Only then, will Somalia see development.

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