There are lessons to be taken from Somalia on how best to grow economies and address poverty

Admin · February 17, 2014

With Japan ranked as only the 27th-easiest place to do business in the world, Tokyo still has a ways to go on critical reforms. Yet, with Prime Minister Shinzo Abe already having brought new hope to the nation — as well as, critics might note, perhaps renewed tensions in the region — the third- largest economy in the world still has many a lesson to share with the likes of Yangon and Mogadishu.

After all, when it comes to doing business, there are few places worse, it seems, than the likes of Myanmar and Somalia. That’s at least, according to the World Bank, which has Myanmar ranked as worst in Asia — at 182nd of 189 economies — on the ease of doing business.

Rounding out the “Top Five” for worst in Asia in “The World Bank 2014 Doing Business” report — the latest annual assessment of the ease of doing business in economies around the world — are Timor-Leste (179th), Afghanistan (164th), Laos (159th) and the Federated States of Micronesia (156th).

None of them, though, should take heart in the retort, “Well, at least we’re better than Somalia.”

Clearly investing in Somalia is not for the fainthearted. Somalia is quite literally off the charts, as the World Bank report once again skips Somalia completely. Lawlessness and lack of reliable data are no doubt two of the factors why Somalia continues to be absent in the rankings.

Yet, just as in the Top Five-ranked economies for ease of doing business — Singapore, Hong Kong, New Zealand, the United States and Denmark — there are lessons to be taken even from Somalia on how best to grow economies and address persistent poverty, whether in Africa or in Asia.

More than ever, given dwindling government budgets and reduced foreign assistance dollars, the private sector — whether brave entrepreneurs, small- and medium-sized enterprises or well-established and deep-pocketed corporations — can play a critical role in fighting poverty.

With well-thought-through partnerships, such efforts can be done in a way that is good for business and more sustainable than aid packages subject to donor fatigue and annual budget cuts.

Just ask Alisha Ryu and David Snelson, the two American business pioneers first spotlighted by me in Fortune magazine.

The two entrepreneurs are behind a Mogadishu guesthouse and security firm, which employs nearly 40 Somali men and women and, by a conservative estimate, indirectly support another 400 extended family members.

Ryu, a former combat journalist, and Snelson, a retired U.S. Army warrant officer, have been living and running their business in Mogadishu full time since 2011. Last year, the U.S. news program 60 Minutes described their role in digging up and returning to the U.S. the remains of a helicopter shot down and made famous in the book and blockbuster Hollywood film “Blackhawk Down.”

Both recount the U.S. military raid to capture a Somali warlord. A deadly battle ensued, killing hundreds of Somalis and 19 Americans 20 years ago in Mogadishu this past October.

That battle was just one of many tragedies in this restless nation on the Horn of Africa. Since then, Somalia has been by ravaged by clan warfare, and is feared worldwide as a breeding ground for pirates and al-Shabaab militants.

Ryu told me, “It was, and still is, our hope that by showing it is possible to do business in Somalia in a smart, knowledgeable way, others will follow our example.”

Indeed, whether in Asia, Africa or the U.S., it will be small businesses and entrepreneurs — regardless of nationality — who will drive long-term change and job creation.

“Business investments that can make money and simultaneously empower communities at the grass-roots level is key to economic growth and the reduction of poverty-related violence in Somalia and everywhere else in the world,” Snelson says.

For nearly four years, I served as U.S. ambassador to and board member of the Asian Development Bank (ADB) — an international financial institution focused on poverty reduction and infrastructure investments, and long presided over by a former Japanese Finance Ministry official. There, too, Ryu and Snelson’s message would have great relevance. (The present governor of the Bank of Japan, Haruhiko Kuroda, was ADB’s last president, before then Japanese Vice Minister of Finance Takehiko Nakao replaced him last year.)

While development banks and aid agencies can provide incremental good, it is good governance and a strong rule of law that are crucial to businesses and essential to job creation and long-term growth.

The private sector must be a serious partner if we are to sustainably lift people out of poverty.

Yet, too often, inept bureaucracy, poor or poorly enforced regulation, interventions by government and endemic corruption get in the way. These challenges of the “little bric” may well be a longer-term constraint to growth and one of the biggest impediments to building better lives for people everywhere, including in the world’s most fragile and conflict-affected states.

Few may have the nerve, or the heart, to do what Ryu and Snelson are trying to do in Somalia — building a business that can turn a profit while promoting economic growth.

But by creating jobs for three dozen Somalis who would otherwise be prey for pirates and religious extremists, perhaps they offer a bit of hope and an example that a small business can have an impact, regardless of how long or how fleeting, even in the most troubled places in this world.

Few Japanese, or people of any nationality, are likely to follow in Ryu and Snelson’s footsteps to Somalia to start a business. But even if they stay home, in the 27th-best ranked economy on ease of doing business, Japan’s own citizens — and particularly its government policymakers — should well consider what it takes to move up the ranks for ease of doing business, and be No. 1, and what that might mean for job creation, economic growth and equality of opportunity.

Curtis S. Chin served as U.S. ambassador to the Asian Development Bank under Presidents Barack Obama and George W. Bush (2007-2010). He is a managing director with advisory firm RiverPeak Group, LLC. Twitter : @CurtisSChin.