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1. Promoting diaspora investment in fragile settings: The case of Somalia

Author:
Guido Lanfranchi
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
This policy brief analyses the extent to which diaspora investment can support economic development and livelihoods, with a particular focus on fragile settings. Using the case study of Somalia, the brief explores some of the main advantages and risks associated with this tool. On the one hand, diaspora investment can channel finance into productive activities in the diaspora’s country of origin, supporting the creation of revenue streams, while also generating returns for diaspora investors. On the other hand, particularly in fragile settings, these investments can also undermine social cohesion and even increase the likelihood of violent conflict, especially if they are channelled along identity lines. On the basis of this analysis, the brief offers the following recommendations to donor governments interested in promoting diaspora investment in Somalia and beyond: (i) to ensure effectiveness, donors should gather comprehensive, in-depth data on the needs and preferences of both potential investors in the diaspora and investees in the country of origin; (ii) to avoid exacerbating tensions and conflict, donors should be as inclusive and transparent as possible in their engagement with stakeholders, most notably in the selection of beneficiaries; (iii) any efforts to promote diaspora investment in fragile settings should be grounded in a thorough understanding of the specific context in which they are implemented, in order to understand both the economic and political implications of such investment.
Topic:
Economics, Politics, Diaspora, Investment, and Fragility
Political Geography:
Africa and Somalia

2. A Transition at Work? The ethnicization of Ethiopia’s informal sector

Author:
Jos Meester and Nancy Ezzeddine
Publication Date:
02-2021
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
The Ethiopian governing regime has defined poverty as the biggest threat to its survival since its inception, and has thus established a top-down developmental state model to drive economic growth that would legitimise its existence. While this model has sustained high GDP growth rates, Ethiopia faces a challenge translating such growth into improved livelihoods. The private sector is weakly developed, and job creation in Ethiopia’s urban centres has not kept pace with population growth or rural-urban migration. Employment in the informal economy has been key to an increasing number of individuals’ livelihoods, yet persistent poverty, inequality and marginalisation is also deepening grievances. The ethnically defined federalist system has created potentially powerful ethnic nationalist constituencies and aligned other previously cross-cutting political cleavages with existing ethnic divides, which result in potentially strong centrifugal forces. The Ethiopian state’s clientelistic approaches to political mobilisation and its claim to legitimacy based on economic growth have equally lost purchase in the face of persistent poverty and marginalisation. With political debate extending beyond previously formalised channels, ethnically based networks are gaining significance. While career perspectives in the formal sector have long been intertwined with the ethnically based political system, such dynamics are becoming increasingly pronounced in the informal sector. The demarcation of boundaries between ethnic groups is becoming more important in the informal sector. While this may help ethnic groupings secure their livelihoods by securing control over various economic sectors and locations, it has reduced inter-group cooperation by eroding cross-cutting social capital and has connected economic grievances with ethnic fault lines. As a result, political tensions between ethnic nationalist groupings increasingly engage substantial urban constituencies, allowing tensions to spill over and exacerbate the broader political strains across the country.
Topic:
Politics, Governance, Ethnicity, and Economic Growth
Political Geography:
Africa and Ethiopia

3. Financial disruption and fragile markets: A political-economic perspective on SMEs in the Somali private sector under COVID-19

Author:
Jos Meester, Johannes Claes, Claire Elder, and Guido Lanfranchi
Publication Date:
05-2021
Content Type:
Special Report
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
This report explores SME growth and resilience in the fragile Somali context during the COVID-19 pandemic, including its relation to wider political-economic developments. The pandemic has demonstrated how Somali businesses have continued to be resilient and at times even thrive during crisis, but it has also exposed the sizeable vulnerability associated with the Somali territories’ trade, import dependence and financing system. The global COVID-19 pandemic has disrupted the supply and trans-shipment of goods. This has created shortages and price fluctuations for Somalia’s import-based economy and hampered the country’s payment system. It has also reduced remittances, buying power, access to finance and tax revenues. Shifts in funding streams have realigned political financing patterns and created price instability as political actors seek new ventures through which to move funds. Although the economic shock brought about by COVID-19 has not structurally changed the Somali political economy, it has exacerbated existing patterns of inequality. The contribution of the private sector to the COVID-19 response has likely supported a range of livelihoods throughout the Somali territories, yet the preferential access to governance and strong competitive position that allowed this also highlights a worrying level of inequality and market concentration, and raises questions regarding government legitimacy. It seems likely that the COVID-induced economic crisis has therefore reinforced rather than destabilised those dynamics that prevent small businesses from competing on an equal footing and fragile situations from developing and stabilising.
Topic:
Economics, Markets, Politics, COVID-19, and Fragile Markets
Political Geography:
Africa and Somalia

4. ‘A careful foot can step anywhere’: The UAE and China in the Horn of Africa: Implications for EU engagement

Author:
Jos Meester and Guido Lanfranchi
Publication Date:
06-2021
Content Type:
Policy Brief
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
Over the last decade, the UAE and China have vastly expanded their economic, political and military footprint in the Horn of Africa, and their actions now have the potential to shape developments in the region. Room for cooperation between Abu Dhabi and Beijing exists on issues such as maritime security, regional stability, and economic development. Moreover, the two countries’ interaction could lead to improvements in the Horn’s underdeveloped infrastructure by triggering a race to investment. Yet, development and stability in the region might suffer if the strategic interests of external players take precedence over local ones, or if local elites (mis)use external support for narrow domestic political calculations. The EU and its member states have high stakes in the Horn’s stability. To optimise their engagement, European policymakers should be aware of the implications of the Emirati and Chinese presence, and they should strive to improve cooperation among the wide range of external players active in the Horn.
Topic:
Economics, International Cooperation, Politics, Military Affairs, Economic Development, and Economic Stability
Political Geography:
Africa, China, Asia, and Horn of Africa