Why Trade Between the UK and Somalia Lags Behind Despite Robust Diaspora Connections
Though the United Kingdom and Somalia share robust diaspora connections, their trade relationship is surprisingly frail and erratic. A noticeable reflection of this relationship is seen in the Somali federal parliament, where around 15 MPs boast dual British citizenship. Additionally, the UK hosts a significant Somali diaspora—109,000 people identified as Somali in the last census, though some estimates surmise a community of around 500,000.
To dive deeper, this article follows up on my earlier work, “Unlocking the Untapped Potential: Strengthening Somali-UK Trade Ties.” In 2023, UK’s exports to Somalia reached £46 million, while imports stood at just £3 million, placing Somalia as the UK’s 171st most significant trading partner.
Analyzing the trade in goods between these nations reveals intriguing trends. For instance, the top exports from the UK to Somalia include miscellaneous foods (£1.6 million), telecoms and sound equipment (£1.1 million), medicinal and pharmaceutical products (£960,000), cars (£830,000), and other electrical goods (£770,000). The smorgasbord of items, ranging from vital sustenance to advanced telecom gear, is quite telling. However, recent years have seen a decline in several categories: telecom exports fell by 34.5%, and medicinal products dropped by 19.3%, indicating challenges in maintaining consistent trade flows between the two nations.
The import numbers paint an even starker picture. The UK’s imports from Somalia primarily consist of crude animal and vegetable materials (£220,000). Many of these imports were non-existent in previous periods, showcasing the sporadic nature of this trade relationship. Furthermore, the import of crude animal and vegetable products plummeted by 62.1%, underscoring the volatility in trade.
Examining the UK’s market share in Somalia provides additional insights. In 2022, the UK’s market share for goods and services in Somalia was 2.3%, an increase from 1.1% in 2021. Yet, a closer inspection reveals mixed signals: the market share for goods dipped from 1.7% in 2021 to 1.5% in 2022. Conversely, services saw a jump from 0.8% to 2.8%, highlighting a promising yet fragile trend.
Foreign direct investment (FDI) is also minimal between the two nations. In 2021, the UK’s FDI stock in Somalia was below £1 million, representing less than 0.1% of its total outward FDI. For perspective, the UK’s global FDI stock amounts to £1.8 trillion, with the United States gobbling a substantial 26.1%. Somalia isn’t a major magnet for UK investment. Likewise, Somali FDI in the UK is practically invisible, hindered by disclosure issues.
The million-dollar question is why. Why is trade between the UK and Somalia so marginal despite the significant Somali presence in the UK? A slice of the answer lies in the structural conundrums both countries face. Somalia’s economy, while burgeoning, is precarious, marred by insecurity and political turbulence. To British businesses, Somalia might appear a gamble too risky. Thus, the UK prioritizes more developed markets, making it tough for smaller nations like Somalia to elbow their way in.
However, this shouldn’t be the end of the road. There’s considerable potential, especially in services, where the UK has already made notable inroads. The Somali diaspora in the UK acts as a crucial bridge, teeming with entrepreneurs who have a unique knack for navigating both markets.
For meaningful trade growth, both sides must amp up their efforts. The UK, its government, trade organizations, and private sector need to devise ideas to incentivize trade with Somalia, possibly through bespoke initiatives. Likewise, Somalia must continue to enhance its business environment to attract foreign investors.
Mohamed Mukhtar Ibrahim, former Somali Minister of Petroleum and Minerals, is accessible via: [email protected]
