Impact of Radical Terrorism on Foerign Direct Investment and Economic Growth in Somalia: Evidence from Auto Regressive Distributive Lag (ARDL) Specification

Abstract

One of the main three factors driving most of the challenges in Somalia are terrorist groups holding swathes of land in the most productive parts of the country, crippling local production, major supply routes and limiting the movement of people and goods and lagging economic growth which is impeding the provision of essential services to the public. Therefore, this paper investigates the relationship between terrorism, foreign direct investment and economic growth in Somalia from the time Al-Shabaab came into existence (2006) up to 2024 using Auto Regressive Distributive Lag (ARDL). The Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests were carried out on all variables to ascertain their stationarity in which mixed order of integration was found. The ARDL result showed that terrorism negatively affects economic growth. This implies that when terrorism increase economic growth reduces. Thus, the study concluded that freeing Somalia from the cruelty of terrorism is not only the key to achieving sustainable peace in the country but also a necessity for building a modern state capable of providing much needed services to the public and eventual sustainable economic growth and prosperity.