Somalia Trade and Foreign Investment

Subchapters:

Business Relationships
Foreign direct investment
FTAs and Treaties
Development Cooperation
Prospective fields of study (MOP)

Business relations

Trade relations with the EU

Due to the economic situation in the country and the need to import almost all goods, Somalia’s trade balance with the EU is considerably negative. Both exports from the EU and imports into the EU have been at a similar level in recent years, despite the global pandemic. The EU is not a key trading partner for Somalia.

	2017	2018	2019	2020	2021
Exports from the EU (million EUR)	145.6	123.9	128.8	136.1	132
Imports into the EU (million EUR)	18	23.2	23.1	18.3	28.3
Balance with the EU (million EUR)	-127.7	-100.7	-105.7	-117.9	-103.7

Source: European Commission

Trade relations with the Czech Republic

From the Czech point of view, the Czech Republic’s trade balance with Somalia was negative until 2017, after which the tide began to turn, and thanks to the growth of Czech exports in 2020 and 2021, the Czech Republic’s balance is significantly positive. In recent years, Czech exports to Somalia have been dominated by photosensitive semiconductor devices including photovoltaic cells, structures and their parts and components, processor units and memory units. Somalia imports coins to the Czech Republic, on the one hand those that are legal tender, and on the other hand those that are not legal tender.

	2017	2018	2019	2020	2021
Exports from the Czech Republic (million CZK)	0.560	3,763	9,109	14,828	25,188
Import to the Czech Republic (million CZK)	4,791	3,512	6,282	5.147	7,216
Balance with the Czech Republic (million CZK)	4,230	-0.251	-2.826	-9.681	-17.972

Source: businesscarriers.com

Trade relations with countries outside the EU

Exports from non-EU countries in 2020 decreased by EUR 100 million compared to the record year of 2019. Compared to exports from the EU, it reaches approximately times higher values. Somali exports to countries outside the EU have a growing tendency and in 2020 were 152 times higher than Somali exports to EU countries.

	2017	2018	2019	2020	2021
Exports from countries outside the EU (million EUR)	246.8	329.7	416.2	314.7	ON
Imports to countries outside the EU (million EUR)	2 111.9	2,192.9	2,582.7	2,743.9	ON
Balance with non-EU countries (million EUR)	-1,865.1	-1,863.2	-2 166.5	-2,429.3	ON

Source: EIU, Eurostat

Foreign direct investment

According to the World Bank, foreign direct investment in Somalia reached a record level of USD 464 million in 2020, an increase of USD 17 million compared to the previous year. The biggest investors in Somalia are Germany and the USA, and recently Turkey has also been active, whose investments are mainly in the construction industry. In 2020, Somalia published a strategy to attract foreign investors, which includes 10 priority sectors, which include manufacturing, energy, fish processing and livestock. Foreign investors are deterred by high levels of corruption, ongoing violence, an unstable political situation, a lack of transparency, the absence of the rule of law, insufficient infrastructure and a high share of the informal economy. The Ministry of Planning opened the Investment Promotion Office in 2019.

FTAs and treaties

Treaties with the EU

Somalia is a signatory to the Cotonou Agreement.

Contracts with the Czech Republic

The validity of the 1976 trade agreement between Somalia and Czechoslovakia was terminated in connection with the entry of the Czech Republic into the EU.

Developmental cooperation

Somalia is a net recipient of development aid. The EU and its member states have allocated EUR billion to projects in Somalia from 2015 to 2020, making them the largest funder. More than half goes to development aid, support for security and the development of education and the economy. Another important donor is the USA.

In Somalia, apart from the EU and CS EU (in Somaliland), Turkey is more involved in development. Its assistance is mainly implemented by the state agency TIKA, but also by non-governmental Turkish organizations. Turkey became more prominent during the famine in the 1990s and became heavily involved after 2011. On the contrary, Somalia helped Turkey gain economic access to the Horn of Africa and East Africa. Turkish aid is often of a budgetary nature, and in the civilian area it is concentrated on infrastructure aid and agricultural projects.

The Czech Republic provides development aid to Somaliland through small local projects, e.g. for the construction of a school or clinic in the Sanaag area.