Somalia: Investing

FDI in Figures

According to UNCTAD’s World Investment Report 2023, FDI inflows to Somalia reached USD 636 million in 2022, up by 5.8% year on year. At the end of the same period, the total stock of FDI was estimated at USD 4.9 billion, representing around 60.3% of the country’s GDP. The capital Mogadishu is currently experiencing a construction boom mostly fueled by Turkish investment, signaling a certain optimism that Somalia is improving. The sector that attracts the most FDI is food processing (bananas and fish) and, more recently, the telecommunications sector. Germany and the United States are the main investors in Somalia. The country launched a new investment promotion strategy in 2020 that outlined 10 priority areas for foreign investment, including livestock, fisheries, energy, and manufacturing. However, strong instability in the country remains a major concern.

Somalia has substantial potential in natural resources: agriculture, livestock, fishing, and hydrocarbons. If the stabilization of the country takes place, this wealth as well as the telecommunications sector could attract many investors. Moreover, Somalia has a young population, a diaspora willing to invest in the country, and, with the longest coastline in Africa, is strategically located to become a potential regional economic hub. However, Somalia is the most corrupted country in the world according to Transparency International (ranking 180th out of 180 economies in the 2023 Corruption Perception Index). The numerous factors that impede FDI include ongoing violence and political unrest, a largely informal economy, high corruption levels and lack of transparency, a lack of central authority jeopardizing rule of law, and lack of basic infrastructure. Moving money into and out of Somalia, enforcing protection of intellectual property, and maintaining access to inexpensive and reliable electricity is also challenging (U.S. Department of State). Foreign firms have shown some interest in investing in the hydrocarbons sector and ports infrastructure, and recently the government has strengthened its regulatory framework to boost hydrocarbons exploration. Recent studies suggest potentially important offshore reserves. In 2023, Somalia implemented a new Investments and Investors Protection Law, aimed at drawing foreign investment. The law eliminates various investment screening measures that previously restricted capital deployment, allowing foreigners complete ownership of their investments, repatriation of capital, and full protection within the country.

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Latest Update: May 2024