Somalia’s Economic Future: Harnessing the Power of the Private Sector for Progress

The World Bank's report emphasizes the pivotal role of Somalia's private sector in driving inclusive growth, addressing structural challenges, and unlocking potential in key sectors like agriculture, energy, and digital services. Coordinated reforms and investments in infrastructure, governance, and skills are essential to foster resilience and sustainable development.

Research by the World Bank Group and International Finance Corporation (IFC), explores the transformative potential of private sector-driven growth in Somalia’s post-conflict recovery. After decades of instability and state collapse, the country began its reconstruction process in 2012, with gradual progress in political and institutional reforms. However, Somalia remains highly vulnerable, facing economic fragility and limited public-sector capacity. In this context, the private sector, which generates 95% of jobs and delivers essential services, is a cornerstone for sustainable development. Yet, unlocking its potential requires addressing foundational barriers and fostering an enabling business environment.

Challenges in a Fragile Economy

Somalia’s private sector is characterized by a lack of diversification, with most activity concentrated in non-tradable services and commerce. While private enterprises dominate key services such as energy, water, and ICT, sectors with high productive potential like agriculture, fisheries, and livestock remain constrained. Agriculture, a traditional economic pillar, faces challenges such as insufficient infrastructure, limited access to markets, and recurrent climatic shocks. The manufacturing sector, which provides less than 1% of jobs, is underdeveloped, reflecting low levels of economic complexity. Somalia also struggles with weak formal institutions, corruption, and fragmented governance frameworks, which deter investment and hinder economic integration.

The infrastructure deficit in transport and logistics further isolates regions, while limited access to affordable finance restricts the growth of small and medium-sized enterprises (SMEs). Digital connectivity, though improving, remains insufficient to fully harness technological opportunities. Unemployment rates, particularly among women and youth, remain alarmingly high due to the mismatch between education and labor market demands, exacerbating social and economic inequalities.

Enabling Growth Through Key Sectors

To drive economic recovery, Somalia must prioritize reforms in enabling sectors such as electricity, financial services, education, water, and transport. Access to affordable and reliable electricity remains a significant barrier for businesses. Establishing robust regulatory frameworks and promoting public-private partnerships (PPPs) can improve electricity access and reduce costs. Similarly, expanding financial services, particularly digital platforms, can enhance economic inclusion and provide SMEs with much-needed capital.

Education is another critical enabler. Aligning technical and vocational training programs with labor market needs can equip Somalia’s youth with skills to meet modern economic demands. Investments in water infrastructure and transport systems can reduce regional disparities and facilitate trade, fostering a more integrated economy. Addressing these foundational constraints can create a supportive ecosystem for private enterprises and attract investment.

Unlocking the Potential of Productive Sectors

Somalia’s productive sectors like agriculture, fisheries, and livestock hold immense potential for driving growth and job creation. However, these industries require targeted interventions to overcome persistent challenges. In agriculture, enhancing data collection and analysis can help identify high-value crops and improve market access. Providing technical assistance and financing to farmers and SMEs can boost productivity and enable the adoption of climate-smart practices, essential for mitigating the impact of climate change.

Similarly, the fisheries sector, with Somalia’s vast coastline, offers untapped opportunities. Investing in cold storage, value chain development, and export infrastructure can unlock its potential. Livestock, a mainstay of the Somali economy, requires better disease control systems and access to international markets. Gender-inclusive policies can ensure that women, who play a significant role in agriculture and fisheries, benefit equally from these initiatives.

Digital Transformation as a Catalyst for Change

Digital technology presents a transformative opportunity to bridge gaps and drive inclusive growth in Somalia. Expanding mobile network coverage and improving internet connectivity can accelerate financial inclusion and trade. Mobile money services, already widely adopted in Somalia, have the potential to support entrepreneurship and ease access to credit. Investments in digital education and e-governance can strengthen human capital and modernize public service delivery.

However, achieving these outcomes requires addressing regulatory gaps and ensuring robust digital infrastructure. By prioritizing digital transformation, Somalia can connect remote regions, foster innovation, and create new opportunities for its population, particularly for women and youth who face systemic barriers in traditional industries.

Building a Path to Inclusive and Resilient Growth

Coordinated efforts among the Federal Government of Somalia (FGS), Federal Member States (FMS), private investors, and development partners are essential to achieving these goals. Harmonizing regulatory frameworks across federal and regional levels can reduce inefficiencies and create a unified business environment. For example, streamlining business registration processes and trade regulations can lower barriers to entry and encourage investment. Public-private partnerships can leverage private sector expertise and resources to deliver public goods and services effectively.

The report calls for sustained commitment to addressing foundational constraints and investing in priority sectors. Efforts to improve infrastructure, promote financial inclusion, and equip youth with market-relevant skills are key to unlocking the private sector’s potential. Climate-smart and gender-inclusive strategies can ensure that growth benefits all segments of society. These initiatives must be supported by evidence-based policymaking and guided by international institutions such as the World Bank Group and IFC, which play a critical role in mobilizing expertise and resources.

Somalia has a unique opportunity to transition from fragility to stability and prosperity. By harnessing the potential of its private sector and investing in strategic sectors, the country can build a resilient, inclusive economy that supports long-term development. The findings of the report provide a clear roadmap for Somalia’s economic transformation, aligning with its broader national development objectives. With the right strategies and partnerships, Somalia can overcome its challenges and emerge as a beacon of growth and opportunity in the region.