Why Invest

WHY INVEST in SOMALIA

Somalia’s economy is growing and is built on a strong trading relationship with the world as well as favorable liberal investment policies that welcome all investors contributing to our dynamic private sector.

Somalia is committed to sound fiscal policy, economic freedom and has a steady and dramatic growth rate which is resulting to improve the economic and investment environments so as to ease the process of investing in Somalia and facilitating further trade and prosperity.

Somalia has a substantial potential in natural resources: agriculture, livestock, fishing, telecommunications, energy, manufacturing, ICT, Construction and Tourism and Hospitality and hydrocarbons. This wealth in all the diverse sectors 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.

Opportunity to invest in farming sector

Somalia offers opportunities to invest in its farming sector as it is currently heavily import-dependent on food, including raw sugar, rice , wheat , pasta and other food related products. Export promotion and increased investment in domestic supply chain development would be attractive for investors.

Imported food items

There are joint venture opportunities for foreign investors seeking local counterparts, Sugar and Cotton processing factories have been earmarked by local Companies. Somalia’s competitive advantage as an investment location for agriculture is supported by various investor friendly factors that include:
  • Proximity to the International Transshipment lines
  • Efficient Telecommunications System.
  • An up to standard Foreign Investment Law
  • Supportive and Dedicated Investment Promotion Office committed to Investor protection, retention and provision of aftercare services.
  • Availability of a well-established export market for agricultural products
  • Highly under invested sector
  • Availability of affordable labor and agricultural land.
  • Stable, Democratically elected government
  • Sophisticated and Innovative Financial and Telecommunications Sector
  • Moderate Inflation Rate
  • Relatively Stable Exchange Rate
  • Rich Diversity of Flora and Fauna

Seasonal fruits in somalia

Additionally, investments in banana, grapefruit, mango, orange, lemon, lime, guava, papaya, water melon, tomatoes, lettuce, onions, peppers, cabbage, pulses, maize, rice, sesame and date palm as potentially high rate of return farming activities. Key areas for potential investment in the farming sector include the following:
  • Agricultural equipment leasing services in partnership with Somali commercial banks;
  • Establishment of agro-processing industries and expansion of existing ones, particularly investments in the sesame value chain (hulling, hosting, tahini etc.)
  • Establishment of agricultural processing zones and industrial parks to add value to farm produce;
  • Establishment of phytosanitary and health regularity control facilities to ensure that agricultural commodities are up to standard before exports;
  • Expansion of rural credit and microfinance services for agriculture;
  • Investment in the skills of farmers to utilize state of the Agri-tools and equipment; and,
  • Sugar factory investment (JSP and Jowhar Factories)
  • Irrigation infrastructure development and management at Shabelle and Juba valleys
  • Extension and Research Services in Somalia
  • Dried and fresh lemon/ lime value chain sector investment
  • Investment to expand Banana & Tomato Production and Processing, (ITOP Factory)
  • Maize, Sorghum and Rice production and processing investment.
  • Date palm and cowpea value chain sectors investment.
  • Beekeeping/honey production
  • Frankincense value chain and export investment.
  • Cotton production and value chain investment (Textile Industry at Baal’ad).
  • Manufacture of sprayers and pesticides controls services,
  • Cold storage/refrigerated transport for perishable products.
  • Value chain sector and export investment
  • Large scale irrigation schemes and services to enhance agricultural productivity

Investing in Somalia’s long coast line for tourism, fishing, and prime real estate, as well as building modern ports and exploiting the country’s ready atmosphere for renewable energy, can also change the Horn of African country into a summer resort, a successful investment venture, and a gateway for GCC business to Africa’s growing consumer market.

Relevant investment and business issues;

Land Laws (December 1980), Somalia Communications Act (2012), Fisheries Law (November 1985), Labour Code (1972), Procurement Legislation (November 2015), Cooperatives Law (October 1973) Civil Code (June 1973), Civil Procedure Code (July 1974) and Provisional Constitution (August 2012).

Currency Conversion and Transfer Policies

The Foreign Investment Law of 2015 offers investors, who meet certain eligibility criteria, the opportunity to obtain a “Certificate of Foreign Investment Registered” (CFIR) in accordance with the terms and conditions contained in the “Certificate of Foreign Investment in an Approved Enterprise”.

In general, the Somali Banking system is modern and efficient, and local commercial banks are fully capable of handling international transactions and trade financing.

  • Availability of a well-established export market for agricultural products
  • Highly under invested sector
  • Availability of affordable labor and agricultural land.
  • Stable, Democratically elected government
  • Sophisticated and Innovative Financial and Telecommunications Sector
  • Moderate Inflation Rate
  • Relatively Stable Exchange Rate
  • Rich Diversity of Flora and Fauna

Bilateral Investment Agreements

Somalia has Bilateral Investment Treaties with Turkey, Germany, and Egypt. Negotiations of similar treaties are in the advanced stages with other countries.

Political Stability

Somalia enjoys a relatively stable political system under a Multiparty Federal Democratic Constitution. The most significant change in Somalia’s context in the last five years has been the decentralization and formation of four Federal Member States (FMS) – Jubbaland (2013), Southwest (2014), Galmudug (2015) and Hirshabeelle (2016) – an advancement in the completion of the Federal Structure of the country that follows a pattern set by Puntland State in 1998. Somaliland region enjoys even a more stable environment as it has hosted several successful elections.

The FGS is solidly committed to the system of federalism as the guiding principle to shape the future of Somalia. A three-tier federal structure has been envisioned and adopted – federal, state and district levels. Although over the past few years, the establishment of the new FMS has almost been completed, significant work remains to be done at the district level and importantly on the precise distribution of roles and responsibilities between the different levels of government.

With all the efforts and progress achieved in rebuilding Somalia, it is likely that political and economic progress will continue as the State’s judiciary systems is more active and well regarded, and the Government is guided or enforces the judicial process and also respects the court decisions against it.

Labor

Federal Government successfully reviewed the Labor Code of Somalia which will help guide and guard the country’s industrial relations practices, as well as ensure a positive image and good investment projection for the national economy. The Somali Constitution allows for the formation of independent trade unions to protect workers’ rights and to promote sound labor relations and fair employment practices. Businesses operating within the EPZ are required to adhere to the Labor Act. In terms of EPZ legislation, however, strikes and lockouts are prohibited within the zone. While there is a large pool of qualified workers in varying professions in Somalia, a shortage does exist in the highly skilled labor force. The Government offers special tax deductions of up to 25 percent to manufacturing companies that provide technical training to employees. Government will also reimburse companies for costs directly related to employee training under approved conditions.

Export Processing Zone (EPZ) Incentives

Enterprises which undertake services, manufacturing, assembly, re-packaging and break-bulk operation and gear all or almost all of their production for export, earn foreign exchange and employ Somalis, will be eligible for EPZ status, which confers an attractive range of both tax and non-tax benefits.

 

Corruption and Crime

The Federal Parliament Government of Somalia enacted and passed the Ethics and Anti-Corruption law which establishes Ethics and Anti-Corruption Commission to fight corruption and economic crimes. The Federal Government of Somalia assures foreign investors of a corruption free investment eco-system.

Performance Requirements and Incentives

Somalia imposes no performance requirements on foreign investors as the Foreign Investment Law 2015 provides all foreign investors with eligibility for incentives and facilities, incentives shall include the ability to have long term leases for up to 99 years for substantial investment in accordance with the applicable legislation governing such incentives and facilities.

Expropriation and Compensation

The Foreign Investment Act protects the investor from expropriation. It also guarantees settlement of any disputes by international arbitration. The local court system provides an effective means to enforce property and contractual rights

Private Ownership Rights

There are no restrictions on the establishment of private businesses, size of investment, sources of funds, marketing products, source of technology, or method of training in Somalia.

Transparency of Regulatory System

The regulatory system is transparent. Labor regulations are equally applicable to all employers, local and foreign, except as noted for companies with export processing zone (EPZ) status.

Protection of Property Rights

The Foreign Investment Law 2015 and the country’s legal system protects and facilities acquisition and disposition of property. The Somali Constitution proscribes expropriation without just compensation.

Openness to Foreign Investment

The Federal Government of Somalia actively seeks foreign investment as a way to develop the economy, generate employment and boost foreign exchange earnings. Somalia’s Foreign Investment Law of 2015 guarantees foreign investors treatment equal to that given to domestic investors fair compensation in the event of expropriation, international arbitration of disputes between the investors and the Government, the right to remit profits and access to foreign exchange. Investment incentives and special tax incentives to encourage FDI are in place. The country’s ease of doing business has been improving on upward basis.

In seeking foreign investment, Somalia recently granted 31 fishing licenses to the China Overseas Fisheries Association. These licenses allow tuna fishing, and this shows that Somalia issues licenses through the legal process.

Policy, Legal and Institutional Framework for Investments

The Federal Government of Somalia, through the National Assembly, enacted and passed the Foreign Investment Law (FIL) in 2015. The FIL established the Foreign Investment Board (FIB) as the highest investment policy making body in the country. Article 6 of the FIL (2015) also established the Somalia Investment Promotion Office (SOMINVEST), at the Ministry of Planning, Investment and Economic Development, as a statutory body to promote foreign investment, provide support and aftercare services, advocate continuously for a better investment climate as well as rebrand Somalia positively.

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