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Agriculture Remains Key to Somalia’s Economic Growth and Poverty Reduction

MD Staff

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The World Bank and the Food and Agriculture Organization (FAO) released today a new joint report titled, Rebuilding Resilient and Sustainable Agriculture in Somalia, outlining the challenges and opportunities for Somalia’s agriculture sector.

According to the findings of the report, over the past three decades, Somalia’s livestock and crop subsectors have been buffeted by an increasingly fragile and degraded natural environment and more frequent and severe cycles of drought and floods. These factors, combined with insecurity, weak government institutions and a deterioration of flood control, irrigation, and transport infrastructure in the south-central regions, have led to a severe decrease in crop yields.

The report, which conducts a comprehensive historical review of Somalia’s major agricultural subsectors (livestock, crops, forestry, and fishing), analyzes the subsectors’ key medium- and long-term development potential and constraints and outlines policy and investment opportunities. It is part of a wider Country Economic Memorandum (CEM) series investigating growth potential across sectors to assist Somalia in its implementation of the National Development Plan (2017-2019), and the preparation of the subsequent plan.

 “This report comes at a critical juncture of Somalia’s development trajectory and investment climate,” says Said Hussein Iid, Minister of Agriculture for the Federal Government of Somalia. “It provides much needed analysis of our productive sectors, the environmental impacts, and the development challenges related to governance, infrastructure, and security.”

Livestock and crops remain the main sources of economic activity, employment, and exports in Somalia. Agriculture’s share of gross domestic product (GDP) is approximately 75%, and represents 93% of total exports, mostly linked to robust livestock exports in the recent pre-drought years. Sesame is now the largest export among crops, followed by dried lemon, in the wake of the total collapse of banana exports. Despite Somalia’s rich fish stocks, coastal fishing has remained small-scale and artisanal while foreign commercial vessels have enjoyed both legal and illegal harvesting offshore.

The combination of collapsed domestic crop production and increased domestic food demand, driven by rapid population growth and urbanization, has led to a massive increase in food imports, which have reached almost $1.5 billion in 2015, up from an annual average of $82 million in the late 1980s.

Rising imports are indicative of increasing demand and a broader opportunity to invest in agriculture, and stimulate a private agribusiness sector in Somalia,” notes Pascal Sanginga, Senior Investment Support Office, FAO Investment Centre. Making more and better investments in agriculture from the government, private sector, civil society and the vibrant enterprising Somali diaspora is one of the most effective ways to reduce hunger and poverty and expand economic.”

In the short to medium term, the recovery of agricultural production depends on better security, stronger public and community institutions, and the rehabilitation of dilapidated flood control, irrigation, and transport infrastructure. In the longer term, the sector’s growth potential can be achieved by developing and implementing a comprehensive sector development strategy, supported by effective institutions and interventions that harness the dynamism of its private sector.

Stronger institutions, management, extension services, and infrastructure are critical to supporting private investment in production and markets,” says Mark Cackler, Practice Manager for the Agriculture Global Practice at the World Bank. “Natural resource management, increased crop production, postharvest long-term storage technologies and private sector-led modernization of the sector is needed to make Somali agriculture outputs competitive.

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Economy

Belarus: Strengthening Foundations for Sustainable Recovery

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The speed of economic recovery has accelerated in early 2018, but the foundations for solid growth need to be strengthened, says the latest World Bank Economic Update on Belarus.

The economic outlook remains challenging due to external financing needs and unaddressed domestic structural bottlenecks. Improved household consumption and investment activity, along with a gradual increase in exports, will help the economy to grow, but unlikely above three percent per annum over the medium term.

“The only way for ordinary Belarusians to have better incomes in the long run is to increase productivity, which requires structural change. While macroeconomic adjustment has brought stability, only structural change will bring solid growth to the country,” said Alex Kremer, World Bank Country Manager for Belarus. “Inflation has hit a record low in Belarus, driving the costs of domestic borrowing down. However, real wages are now again outpacing productivity, with the risks of worsening cost competitiveness and generating cost-push inflation.”

A Special Topic Note of the World Bank Economic Update follows the findings of the latest World Bank report, The Changing Wealth of Nations 2018, which measures national wealth, composed of produced, natural, and human capital, and net foreign assets. Economic development comes from a country’s wealth, especially from human capital – skills and knowledge.

“Belarus has a good composition of wealth for an upper middle-income country. The per capita level of human capital exceeds both Moldova and Ukraine. However, the accumulation of physical capital has coincided with a deterioration in the country’s net foreign asset position,” noted Kiryl Haiduk, World Bank Economist. “Belarus needs to rely less on foreign borrowing and strengthen the domestic financial system, export more, and strengthen economic institutions that improve the efficiency of available physical and human capital.”

Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled US$1.7 billion. In addition, grant financing totaling US$31 million has been provided, including to programs involving civil society partners. The active investment lending portfolio financed by the World Bank in Belarus includes eight operations totaling US$790 million.

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Economic Growth in Africa Rebounds, But Not Fast Enough

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Sub-Saharan Africa’s growth is projected to reach 3.1 percent in 2018, and to average 3.6 percent in 2019–20, says Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank, released today.

The growth forecasts are premised on expectations that oil and metals prices will remain stable, and that governments in the region will implement reforms to address macroeconomic imbalances and boost investment.

“Growth has rebounded in Sub-Saharan Africa, but not fast enough. We are still far from pre-crisis growth levels,” said Albert G. Zeufack, World Bank Chief Economist for the Africa Region. “African Governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth.”

The moderate pace of economic expansion reflects the gradual pick-up in growth in the region’s three largest economies, Nigeria, Angola and South Africa. Elsewhere, economic activity will pick up in some metals exporters, as mining production and investment rise. Among non-resource intensive countries, solid growth, supported by infrastructure investment, will continue in the West African Economic and Monetary Union (WAEMU), led by Côte d’Ivoire and Senegal. Growth prospects have strengthened in most of East Africa, owing to improving agriculture sector growth following droughts and a rebound in private sector credit growth; in Ethiopia, growth will remain high, as government-led infrastructure investment continues.

For many African countries, the economic recovery is vulnerable to fluctuations in commodity prices and production,” said Punam Chuhan-Pole, World Bank Lead Economist and the author of the report.  “This underscores the need for countries to build resilience by pushing diversification strategies to the top of the policy agenda.”

Public debt relative to GDP is rising in the region, and the composition of debt has changed, as countries have shifted away from traditional concessional sources of financing toward more market-based ones. Higher debt burdens and the increasing exposure to market risks raise concerns about debt sustainability: 18 countries were classified at high-risk of debt distress in March 2018, compared with eight in 2013.

“By fully embracing technology and leveraging innovation, Africa can boost productivity across and within sectors, and accelerate growth,” said Zeufack.

This issue of Africa’s Pulse has a special focus on the role of innovation in accelerating electrification in Sub-Saharan Africa, and its implications of achieving inclusive economic growth and poverty reduction. The report finds that achieving universal electrification in Sub-Saharan Africa will require a combination of solutions involving the national grid, as well as “mini-grids” and “micro-grids” serving small concentrations of electricity users, and off-grid home-scale systems. Improving regulation of the electricity sector and better management of utilities remain key to success.

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Multilateral Development Banks Present Study on Technology’s Impact on Jobs

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Rapid technological progress provides a golden opportunity for emerging and developing economies to grow faster and attain higher levels of prosperity. However, some disruptive technologies could displace human labor, widen income inequality, and contribute to greater informality in the workforce. Tapping new technologies in a way that maximizes benefits, mitigates adverse effects, and shares benefits among all citizens will require public-private cooperation and smart public policy.

That is one of the main conclusions of a new study, The Future of Work: Regional Perspectives, released today by four regional multilateral development institutions: the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), and the Inter-American Development Bank (IDB).

The study, which was presented at a seminar hosted 19 April at the IDB in Washington, D.C., explores the potential impact of technology in global labor markets and identifies concrete actions countries can take to prepare for the changing nature of jobs and leverage the benefits of emerging technologies.

The Future of Work: Regional Perspectives analyzes the challenges and opportunities presented by artificial intelligence, machine learning, and robotics in what is known as the Fourth Industrial Revolution. Potential challenges include increased inequality and the elimination of jobs, as well as the high degree of uncertainty brought about by technological change and automation. The greatest opportunities come from gains in economic growth that can result from increased productivity, efficiency, and lower operating costs.

The study includes chapters focusing on how new technological developments already are affecting labor markets in each region.

In the case of Asia and the Pacific, ADB research shows that even in the face of advances in areas such as robotics and artificial intelligence, there are compelling reasons to be optimistic about the region’s job prospects. New technologies often automate only some tasks of a job, not the whole. Moreover, job automation goes ahead only where it is both technically and economically feasible. Perhaps most importantly, rising demand—itself the result of the productivity benefits that new technologies bring—offsets job displacement driven by automation and contributes to the creation of new professions.

“ADB’s research shows that countries in Asia will fare well as new technology is introduced into the workplace, improving productivity, lowering production costs, and raising demand,” said Yasuyuki Sawada, ADB’s Chief Economist. “To ensure that everyone can benefit from new technologies, policymakers will need to pursue education reforms that promote lifelong learning, maintain labor market flexibility, strengthen social protection systems, and reduce income inequality.”

The publication was launched with a panel discussion featuring senior officials of the four regional development banks leading the study: Luis Alberto Moreno (IDB President), Charles O. Boamah (AfDB Senior Vice-President), Takehiko Nakao (ADB President), and Suma Chakrabarti (EBRD President). They were joined by Susan Lund (Lead of the McKinsey Global Institute) and Pagés, one of the co-authors.

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