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Economic Assessment of Somalia's Accession to the East African Community

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Titel: Economic Assessment of Somalia's Accession to the East African Community
Autoren: World Bank
Verlagsinformationen: Washington, DC: World Bank, 2025.
Publikationsjahr: 2025
Schlagwörter: EAST AFRICAN COMMUNITY (EAC) MEMBERSHIP, LIVESTOCK EXPORT DEPENDENCY, NORTHERN CORRIDOR INFRASTRUCTURE PROJECTS, TRADE AND INVESTMENT OPPORTUNITIES, ECONOMIC GROWTH, ECONOMIC DEVELOPMENT
Beschreibung: Somalia’s accession to the East African Community (EAC) presents a transformative opportunity to accelerate its economic development and integrate more effectively into the regional economy. With membership, Somalia could access a broader market of over 300 million people, enhancing trade and investment opportunities, and facilitating a more diversified economic base. This accession would also pave the way for Somalia to engage in regional infrastructure projects such as the Northern Corridor, which promises to improve connectivity and reduce trade bottlenecks, facilitating smoother intra-regional trade. Additionally, aligning with the EAC’s regulatory frameworks could help enhance Somalia’s investment climate, attract foreign direct investment (FDI), and increase its competitiveness, thus spurring economic growth, generating jobs, and supporting development. Finally, Somalia stands to benefit from the EAC’s financial integration initiatives, which could provide access to regional financing mechanisms and deepen its banking sector. Somalia’s path to full integration within the EAC, however, is fraught with challenges. A significant hurdle is its reliance on a narrow range of exports, particularly livestock, which leaves the economy vulnerable to global price volatility and limits its capacity to adapt to economic shocks. Compounding this issue are underdeveloped infrastructure, weak regulatory frameworks, security challenges, and the unfinished federalism agenda, all of which may hinder Somalia’s ability to fully capitalize on the benefits of regional integration. Somalia’s fiscal dependence on customs duties, furthermore, creates vulnerabilities to the Common External Tariff (CET) changes. While an ad valorem tariff system could boost government revenue, it also risks increasing import costs, thereby raising consumer prices and the cost of living. This policy note presents an assessment of the economic impact of the EAC’s CET on imports and revenue. The assessment is based on UN Comtrade mirror data and looks at overall as well as sectoral impacts. The policy note proposes a set of reform options to maximize the benefits of Somalia’s EAC accession and address institutional gaps. A separate policy note3 looks at the legal aspects of EAC accession.
Publikationsart: Report
Dateibeschreibung: application/pdf; text/plain
Sprache: English
DOI: 10.1596/43538
Zugangs-URL: https://openknowledge.worldbank.org/entities/publication/ca270665-fad3-4593-8cfd-32e6bf1af0fa
https://hdl.handle.net/10986/43538
Rights: URL: https://creativecommons.org/licenses/by-nc/3.0/igo
Dokumentencode: edsair.od......2456..ac0b913718c945e31863acb0a75c1311
Datenbank: OpenAIRE
Beschreibung
Abstract:Somalia’s accession to the East African Community (EAC) presents a transformative opportunity to accelerate its economic development and integrate more effectively into the regional economy. With membership, Somalia could access a broader market of over 300 million people, enhancing trade and investment opportunities, and facilitating a more diversified economic base. This accession would also pave the way for Somalia to engage in regional infrastructure projects such as the Northern Corridor, which promises to improve connectivity and reduce trade bottlenecks, facilitating smoother intra-regional trade. Additionally, aligning with the EAC’s regulatory frameworks could help enhance Somalia’s investment climate, attract foreign direct investment (FDI), and increase its competitiveness, thus spurring economic growth, generating jobs, and supporting development. Finally, Somalia stands to benefit from the EAC’s financial integration initiatives, which could provide access to regional financing mechanisms and deepen its banking sector. Somalia’s path to full integration within the EAC, however, is fraught with challenges. A significant hurdle is its reliance on a narrow range of exports, particularly livestock, which leaves the economy vulnerable to global price volatility and limits its capacity to adapt to economic shocks. Compounding this issue are underdeveloped infrastructure, weak regulatory frameworks, security challenges, and the unfinished federalism agenda, all of which may hinder Somalia’s ability to fully capitalize on the benefits of regional integration. Somalia’s fiscal dependence on customs duties, furthermore, creates vulnerabilities to the Common External Tariff (CET) changes. While an ad valorem tariff system could boost government revenue, it also risks increasing import costs, thereby raising consumer prices and the cost of living. This policy note presents an assessment of the economic impact of the EAC’s CET on imports and revenue. The assessment is based on UN Comtrade mirror data and looks at overall as well as sectoral impacts. The policy note proposes a set of reform options to maximize the benefits of Somalia’s EAC accession and address institutional gaps. A separate policy note3 looks at the legal aspects of EAC accession.
DOI:10.1596/43538