According to UNCTAD’s 2022 World Investment Report, FDI inflows to Somalia reached USD 456 million in 2021, down slightly from USD 464 million in 2020. The FDI stock stood at USD 4.1 billion in 2021. In 2022, global FDI momentum weakened in the context of the war in Ukraine, rising food and energy prices, financial turmoil and debt pressures (UNCTAD’s Investment Trends Monitor). Strong instability in the country remains a major concern, although Al-Shabab's losses and its current weak position are positive signals for investors. The capital Mogadishu is currently experiencing a construction boom mostly fuelled by Turkish investment, signalling 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.
Somalia has a substantial potential in natural resources: agriculture, livestock, fishing and hydrocarbons. If the stabilisation 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 (ranking 180th out of 180 economies) according to Transparency International. 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 jeopardising 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. Although the US has invested more in the country, Germany has the largest subsidiary of a transnational corporation in country (German Agro Action Office) (AfDB).
|Foreign Direct Investment||2020||2021||2022|
|FDI Inward Flow (million USD)||534||601||636|
|FDI Stock (million USD)||3,685.5||4,286.5||4,922.5|
|Number of Greenfield Investments*||1.0||0.0||2.0|
|Value of Greenfield Investments (million USD)||109||0||135|
Source: UNCTAD - Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
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Latest Update: September 2023