Executive summary

In today’s business world, regional integration is acknowledged as a strong force for
promoting social and economic growth. Developed and developing economies alike adopt
policies and initiatives for regional integration to achieve mutual economic, social, and
political development goals. Federal Republic of Somalia (FRS) applied to join the East
African Community (EAC). In August 2022, the president appointed a special envoy to the
EAC, who has made significant progress within a short span. On June 6th, 2023, the EAC
Heads of States Summit adopted the verification report of Somalia to join the EAC.
Negotiation teams from Somalia and the EAC met from 22nd to 30th August 2023 in
Nairobi, Kenya, to negotiate Somalia’s admission into the EAC as directed by the Summit
of EAC Heads of States. The final decision regarding Somalia’s admission into the EAC will
be discussed at the Summit of Heads of States, which is scheduled for November 2023.

This study investigated the readiness and the viability of Somalia’s Integration to join the
EAC. It adopted a descriptive approach using secondary data collected from the EAC
open data for Africa, World Economic Outlook Database – IMF, Africa Regional Economic
Outlook – IMF, the World Bank, the Ministry of Finance of Somalia, and the Central Bank
of Somalia from 2015-2022. The variables assessed are GDP growth, inflation rate, public
debt, reserve cover, government revenue and expenditure as a percentage of GDP,
external grants, total tax as a percentage of GDP, trade openness, foreign direct
investment (FDI), & exports & imports.

According to the findings, most EAC partner states have struggled to meet the
macroeconomic convergence requirements. Somalia has performed relatively better in
number of the macroeconomic convergence criteria than EAC partner states. Regarding
fiscal policy performance, the EAC is doing better compared to Somalia. Somalia’s
domestic income comes mainly from customs taxes. Therefore, Somalia must diversify its
revenue sources and avoid heavy dependence on customs duties. It must raise taxes on
goods and services (VAT), income, profits, and capital gains (corporate tax), and property
taxes, etc. Somalia has shown an increasing trend in FDI attraction. For the intra-regional
trade data, all EAC countries have shown an increasing trend in intra-regional trade, but it
remains low. The inter-trade between Somalia and the EAC is insignificant and needs to
be addressed. This study recommends that Somalia establish some key institutions
required to coordinate and implement aspects of the EAC integration process.

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