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Ismail Ali Siad
Graduate School of Business and Economics,
De La Salle University,
Manila, The Philippiness.
Part I of the report by Maren, a freelance journalist, provides raw materials on the economic situation of Mogadisho, Somalia, for the readers to analyze and discuss. The report describes the relationship between the NGOs and development bureaucracies. It speaks of substantial (economic) progress that has been made in Mogadisho despite the absence of a central government and the closure of the port and airport. To substantiate the claim of substantial progress, the author stated that business is booming, markets are full of goods, more young men are taking up jobs in industry, foreign exchange markets are relatively efficient, and telecommunication system is efficient.The author sounds optimistic.
There has not been positive reports from Somalia lately. Nevertheless, a rigorous analysis of the data may be necessary. It seems that economic growth rather than sustainable development is the more appropriate concept in the report. Development is a broader concept and involves the transformation of social, economic, and political institutions. There are three equally important aspects of development:(1) Raising people's living levels, (2) Enhancing people's self-esteem, and (3) Increasing people's freedom (Todaro,1994).
How the increased business activity is financed ? Domestic financial resources may not be sufficient to finance the needed economic growth. Capital formation, which plays a central role in economic growth, requires savings and their investment in a productive way. Given the subsistence income level prevailing in Somalia, there is a need for foreign capital to stimulate a real economic growth. Foreign aid may be the most promising potential form of foreign capital. It is true that it distorts the market mechanism and the efficient allocation of scarce productive resources. It is also true that foreign aid widens the income gap between the warlords and their cronies and the general people. However, it is hard to rationally expect foreign direct investment or foreign private loans in Somalia in the near future. Some of the local businessmen who put up the telephone enterprises perhaps milked the NGO operations or are economic scavengers. It seems the NGOs are NOW necessary evils in Somalia. The money they have to spend is needed to rebuild the infrastructure and the economy.But their lack of real development policy and a check and balance system are counter productive.
It may also be too early to talk about sustainability of whatever progress that has been made, considering the lack of a concomitant progress in politics, health and education services, security, legal system, etc. Moreover, economic growth is necessary but not a sufficient condition for a sustainable development. An equally important issue is the distribution of the bigger pie / income. The market mechanism rewards only those who participate the economic process ( the minor, old, sick, disabled, etc. will not benefit) and can handle only divisible/private goods.Without an effective government that would address these issues, implement contracts, maintain security, and control the liquidity in the economic system (who will replace the worn-out paper money for instance?) , the private sector initiatives may be short-lived or limited to short-term, liquid investments. The projects and the companies cited in the report utilize modern technology. So the number of jobs they provided may be insignificant.