The effect of foreign direct investment inflows on the economic performance in Somalia

Somalia is promoting herself as a viable investment destination in Sub Saharan Africa. Despite the long period of instability and conflicts, businesses are booming in Somalia today. Recently, Somalia woke up to join the rest of the world to start attracting FDI as one of the routes to economic progress. The need to rebuild the economy is pushing Somalia to find development capital which is the driving force behind the push for FDI inflows to Somalia. The present study has examined the concept of international business and it investigated the effect of inward FDI to Somalia's economic growth and development. Empirical evidence indicates that FDI has both a short run and long run positive effect on economic growth in Somalia. It is therefore recommended that inward FDI should be further encouraged into Somalia, by providing incentives to the investors, since it has economic and social value for the country. Other factors that were part of the study model, included exports, domestic investment, labor and inflation. Except for Inflation, all other factors turned to have a positive effect on economic growth in Somalia. Hence, it is equally recommended that Somalia should improve the environment of those factors.