Despite more than 20 years of civil war, Somalia has a remarkably strong private sector, particularly in trade, money transfer, telecommunications, and livestock spheres. This is no small achievement, given that remittances alone are estimated at $1bn-2bn a year in Somalia – and this figure does not even take into account the vital role the diaspora play in providing basic services such as healthcare, education and water, as well as infrastructure and enterprise.
Significant progress has been made in peace and state building and in the economic recovery programme, helped by substantial support from donors. The more stable regions of Somaliland and Puntland have established functioning governance structures and favourable business environments that have facilitated investment in sectors including livestock, import and export, telecommunications, remittances and more. Yet, aid agencies have failed to engage systematically the Somali private sector and diaspora entrepreneurs in their work. These areas are now ready for support to private sector development, investment, and economic policy development.
There are significant operational challenges to working with businesses in Somalia. Security remains a concern in some regions; its financial industry is not linked with the international formal financial institutions. A further challenge relates to the threat of the private sector exacerbating the cyclical crises that continue to burden Somalia – as witnessed most recently in the 2011 famine.
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