1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The FGS and the Federal Member States (FMS) have a positive attitude towards foreign direct investment (FDI). However, insecurity and uncertainty driven by terrorist groups, lack of transparency, failure to fully constitute governing bodies per the 2012 provisional constitution, and widespread corruption in government sectors present considerable barriers to FDI.
Parliament passed a foreign investment law in 2015 to promote and protect foreign investment. The law also provides some incentives to foreign investors, such as tax advantages and guarantees against expropriation.
In September 2020, Somalia’s investment promotion authority, Sominvest, released a five-year National Investment Promotion Strategy, which aims to improve the investment climate and Somalia’s image abroad. This strategy paints a rosy picture of doing business in Somalia and suggests the key areas with potential for foreign investment are agriculture, fishing, energy, and banking.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are no laws that address private ownership rights or limit foreign control.
Other Investment Policy Reviews
There has not yet been a third-party investment review of Somalia.
The FGS is not a member of the World Trade Organization (WTO) or the Organization for Economic Cooperation and Development. In 2017 Somalia submitted a notification of intent to join the WTO, and in May 2020, after working through the accession stages, Somalia submitted a Memorandum on the Foreign Trade Regime, a document that outlines its trade and economic policies and its trade agreements with other countries. The WTO confirmed Somalia’s Working Party chairperson, Swedish Ambassador to the WTO Mikael Anzen, in October 2020 and is planning the first Working Party meeting for mid-2021.
The FGS rejoined the Common Market for Eastern and Southern Africa in July 2018. As a member, Somalia is required to undertake several institutional, policy, and regulatory reforms to meet the organization’s free trade protocols.
The FGS has applied for East African Community (EAC) membership, which would allow Somalia to formalize trade with its neighbors and facilitate movement of Somali citizens to other EAC member states through acquisition of the common EAC passport. However, at the February 2021 Heads of State Summit, the EAC found that Somalia’s application was not yet ready for a decision.
Somalia has also indicated its intent to participate in negotiations on the African Continent Free Trade Agreement.
In 2019 the FGS passed a company law formalizing the legal requirements to create and register a company. Also in 2019, the Ministry of Commerce and Industry announced the launch of a “one-stop shop” business registration website, but it has not yet become operational.
The World Bank ranked Somalia 190 of 190 countries in its 2020 Ease of Doing Business Report.
The Somali government does not have a policy that promotes or incentivizes outward investment. Anecdotal evidence suggests that Somalis who accumulate wealth seek to move it overseas to avoid the uncertain domestic investment environment.