Generally Economic growth is more and more becoming a significant issue in the world economy and is something that every government seeks to obtain. Every country tries to extend his level of production, and promote high level of education in order to achieve economic growth. While 75% of Somali’s youth is unemployment according to World Bank and just government beginning to function.and the country had experienced a poor economic growth for many decades because of conflict. Before the 2000’s different studies expresses to bring out the factors responsible for the poor economic performance and disagreement from developing region. Opinions varied but, why Somalia had been some of the poorest in the world it reveals to limited access to finance from both domestic and external sources, external debt, weak infrastructure, absence of developed legal system and inadequate human capital are the most significant constraints in economic growth. Furthermore politcal conflict is a feature that raises constraint. During the last two decades Somalia presents weak overall economic performance and has been less economically attractive in comparison to other developing countries. So in this article I will try to underline and also shet light on the binding constraints of achieving economic growth in Somalia.
Low saving is a constraint
Different growth theories emphasize the significance of saving and growth process. Studies in cross- countries shown that saving rate as one of the determinant factors for growth that burden countries with low saving tend to have low investment and no growth. Therefore, its important to build on the fact that adequate domestic saving that required sustainably finance private and public investment project. In generally luck of saving is the key reason why financial capital is a short supply and deter investment.
External dept as a constraint
historical dept is critical factor that constraints the growth Somalia is obligated to $5.3 billion of external dept and in the capability of future has view prospects to pay it back. While progress has been made in rebuilding in Somalia after two decades of civil war, it remains one of the poorest nations in the world. Languishing at the bottom of the united nations indicator tables. Dept in particular IMF restricts Somalia from barrowing for large-scale projects that can produce general changes in the economy or facilitate new revenue streams. In may 2017 the president raised the dept issue in speech at high level in London Somalia conference. He is quoted saying: “we have now developed a well defined milestones based road map to arrears clearance and normalization of relations with international financial institutions “ the resident pledged personally flow the process at the same conference, UN secretary general Antonio Guterres said Somali’s debt issue was not just economic and financial but, also “a moral question”.
Weak infrastructure as constraint
Infrastructure includes physical capital such as critical energy power and water supplies, sanitation, telecommunications & transport networks, schools and hospitals Evidence shows a positive correlation between a country’s development and the quality of its road network, Poor Infrastructure Causes higher supply costs and delays for businesses or Reduces labor mobility and makes hard the ability of exporters to get products to global markets that constraints the economic growth. According to the World Bank, transport costs are 25-30% of product costs in developing countries partly because of deficiencies in infrastructure.
The relationship between infrastructure and economic growth has been studied extensively, and poor infrastructure is identified by many as a binding constraint for doing business and for economic growth.
ABSENCE OF A DEVELOPED LEGAL SYSTEM
In Somalia there is an absence of a developed or appropriate legal system in the following areas:
Property rights are not protected
The right to start a business is limited to a small section or a favored elite
Consumer rights are not protected
Employment rights do not exist
Competition law is limited or absent
Finally, removing these constraints can lead to higher economic growth and prosperity, and the nation should work to reform the financial sector, so as to mobilize the required finance for both private and public investment projects. Infrastructure development should be another priority for government.In order to reduce information failure by promoting the benefits of education andusingthe market system to send out effective signalsto encouragepeople to alter their behavior. and to solve the failure to apply technolgy.
