Somalia CPSD Report Emphasizes Urgent Reforms for Economic Growth and Job Creation

The report identifies a significant gap in structural transformation, noting that much of the private sector activity is concentrated in non-tradable, consumption-driven services.

Today’s release of the Somalia Country Private Sector Diagnostic (CPSD) underscores the pivotal role of the private sector in Somalia's economic development and recovery. With the private sector accounting for an estimated 95 percent of jobs in the country, leveraging its potential is crucial for rebuilding infrastructure, fostering growth, and creating inclusive economic opportunities.

The CPSD report highlights that while Somalia's private businesses have shown resilience and currently dominate the market with essential goods and services, the country's tradable sectors remain underdeveloped. The report identifies a significant gap in structural transformation, noting that much of the private sector activity is concentrated in non-tradable, consumption-driven services. This has resulted in limited job creation and productivity, with only a few firms benefiting from market dominance.

Kristina Svensson, World Bank Country Manager for Somalia, emphasizes the need for comprehensive reforms to strengthen formal institutions and regulatory frameworks. These reforms aim to promote equitable growth and create an enabling environment for private sector-led economic transformation.

Key challenges identified in the CPSD include policy constraints, inadequate institutional frameworks, corruption, and limited access to essential sectors such as finance, energy, transport, ICT, and education. These factors hinder productivity growth and foreign direct investment (FDI), thereby limiting trade opportunities and technological advancement.

The CPSD proposes a strategic framework to unlock Somalia's private sector potential through three main recommendations:

1. Deepening Reforms: Establishing effective and equitable formal institutions and regulatory frameworks to foster growth.

2. Sectoral Participation: Promoting private sector involvement and enhancing public stewardship in critical sectors like energy and finance.

3. Value Chain Development: Improving productivity and growth in selected value chains for immediate and medium-term economic gains.

Cheick-Oumar Sylla, IFC's Director for North Africa and the Horn of Africa, stresses the importance of ongoing policy reforms to sustain private sector momentum and drive long-term economic development. The report also identifies feasible investment opportunities in energy infrastructure upgrades, renewable technologies, digital financial services, and microfinance as critical drivers of economic growth and development impact in Somalia.

Fostering a vibrant and inclusive private sector is pivotal for Somalia's journey towards sustainable economic growth, job creation, and resilience against fragility. Addressing policy gaps, enhancing infrastructure, and unlocking investment opportunities across key sectors are essential steps in realizing Somalia's economic potential and ensuring inclusive development for its people.