Somaliland's Private Sector at a Crossroads: Political Economy and Policy Choices For Prosperity and Job Creation

Abstract

The Somaliland economy is driven by the private sector. Unlike most other economies in the world, the government footprint is limited, amounting to under 10 percent of the gross domestic product (GDP). As will be presented in this report, this context is both a structural advantage and constraint to further economic growth and the capacity of the private sector to create the jobs demanded by a growing population, after a generation of hard work building a political system and economy from the remains of a destructive civil war. The report strives to take stock of the progress to date in private sector performance and development and to identify policy priorities that the government, in partnership with the private sector, can pursue in furtherance of job creation and growth objectives. The target audience for this report is principally the Government of Somaliland (GoS) and its private and financial sectors. The report also hopes to contribute to the work of Somaliland’s other development partners. To this end, the report commences with an overview of the structure of the private sector and a recap of the business environment within which it operates, drawing for this latter aspect on the findings of the Doing Business in Hargeisa 2012 report (World Bank and IFC 2012). The report then proceeds with a more in-depth look at the characteristics of the three key ‘sectors’ that drive the Somaliland economy, the private, financial, and government sectors, and the factors that impact their overall performance in achieving government policy objectives, as set out in the GoS’s document titled Somaliland National Vision 2030. The specific issues addressed include, as requested by the GoS, enterprise formalization, financial inclusion, government capacity, and economic governance. This is most appropriate, as the analysis clearly points to these issues being of primary importance to the achievement of a growing and job-creating economy. The report concludes with some recommended short-, medium-, and longer-term policy priorities for each of the three key sectors.