Project Case Study
Improving investment flows to Somaliland
Finding opportunities for investment in the frontier economy of Somaliland
Somaliland, as an area of comparative stability to the rest of Somalia, offers good opportunities for profitable investment.
Its private sector is flourishing, despite the absence of strong government authority and public sector service provision, and has historically been important in establishing peace and stability.
However, Somaliland remains a frontier economy in which many market needs are yet to be met.
A small but growing pipeline of viable opportunities for investment exists. The livestock sector, the backbone of the economy, is relatively undeveloped with limited extension and support services and the fisheries sector has barely been tapped. Light manufacturing, the service sector and media are all ripe for investment, as are services such as health, education and power that are mostly provided by the private sector or funded by diaspora groups.
The structure of the economy does not, however, necessarily favour new investment and entrants. Monopolies intertwined with Somaliland’s business and social structures are prevalent, and access to credit is limited. The level of skills and information necessary to sustain growth is also insufficient, and transport and power costs are exorbitantly high. The legal framework for investment exists but is poorly implemented and enforced, compounded by an ineffective judiciary. Lastly, Somaliland’s lack of international recognition and volatile environment constrain growth and investment.
To address these challenges and unlock potential, the Department for International Development asked us in 2012 to undertake a study, entitled “Improving investment flows to Somaliland”, to identify options for them to consider as they endeavour to promote investment in the region. We made five main recommendations. These were the establishment of a Somaliland Business Solutions Centre, a Matching Grant Facility, reform of the Foreign Investment Law, support for the establishment of the Foreign Investment Promotion Office, and support for the establishment of the Commercial Arbitration Panel. These recommendations look to promote future investment into Somaliland, stabilising the region’s economy, and leading to a reduction in poverty for its population.
“Somaliland is a frontier economy in which many market needs are yet to be met, and many opportunities yet to be taken.”
Somali diaspora investor