Somalia, plagued by pirates operating in its waters, warring factions and border conflicts, is not a place where foreign investors are falling over themselves to put their money. But Dubai's Lootah Group has bucked the trend by signing a Dh170 million agreement with the President of Puntland, a self-governing state in the north-east of the country, to support the construction of an airport, seaport and free zone in the coastal city of Bosaso.
The group has experience of infrastructure projects in Djibouti and Tanzania and believes Somalia, virtually untouched by modern development, could become a successful trading hub with help from overseas investors.
Tarek Niazi, an advisor and consultant to Lootah Group, said: "This area is in need of development and it is untouched, which means it has tremendous potential."
Puntland has remained relatively stable since the 1991 civil war, compared with Somalia's capital, Mogadishu, which is still troubled by tribal conflict.
The state declared itself autonomous in 1998 though it supports Somalia's Transitional Federal Government (TFG), which has established little authority since its formation in 2000.
Puntland says it will retain control of its affairs until the capital manages to halt the fighting in its region.
But the lack of foreign investment combined with a high level of migration of its people has meant that the development of the state's institutions and infrastructure has been slow.
But the government believes the situation is about to change thanks to Lootah's investment plus the exploration for oil that is under way 120km from Bosaso in the Dharoor and Nogal valleys. Prospectors believe this area could be Africa's second largest oil reserve after Sudan.
Puntland's President Mohamoud Musa Hersi Adde told Emirates Business about the opportunities opening up in the state during an interview at the presidential palace following last week's signing of the Lootah agreement.
"I believe that when we finish all these projects our people will benefit by getting good health services, education and overall prosperity," he said.
"We have our regulations that will protect the interests of Puntland and we control our natural resources but the TFG will get its share of royalties if oil is discovered.
"The Lootah Group has seen the prospects of this land and we are grateful for the opportunity. We are rich in minerals, fish and livestock and need to establish better ways of trading, and this is now going to happen with this latest agreement."
The existing airport, little more than a 1km strip of gravel running parallel to the Gulf of Aden, has no control tower, terminal or ticket office. A few soldiers take care of passport control.
Moving out to Airport Road, which like all other streets in Bosaso is unpaved, visitors pass through small neighbourhoods of wooden huts before reaching rows of stone and breeze-blocked housing.
Between these homes are heaps of rubble and rubbish, making the city look untidy and indicating that there is little organisation nor funds to clear up the area.
Of more concern to residents is food and water. Food is bought from tiny market stalls or received from UN handouts while water is collected from street wells. Electricity supplies are limited and at night the city is plunged into near darkness, with the only visible lighting coming from the perimeters of the few larger homes or the odd TV outside a hut or shop.
Lootah's advisory Niazi said the many obstacles faced by Puntland were what made it attractive.
"You have to take risks in business and we are taking the first steps to invest here. On top of this the Lootah Group has experience in Djibouti and Tanzania."
Lootah, set up in 1973, has its own engineers, a construction division and asphalt and ready mix companies, which will work together to complete the projects.
The new airport has been under construction since 2006 with a new terminal building completed earlier this year.
It was in the departure lounge of this terminal, visible from the existing runway, that the Lootah deal was signed in front of hundreds of community representatives. Now Lootah will complete the 3.4km runway, taxi and apron areas, security fences and auxiliary buildings to international standards over the next 12 months.
At present the only usable runway sees half a dozen aircraft a week carrying UN supplies, other cargo and passengers travelling from Dubai via Djibouti.
It is hoped that following the completion of the new airport this number will rise to 10 or even 15 flights a week taking-off and landing in Bosaso, 50 per cent of which will be trade runs.
Abdullahi Ali Hersi, Puntland's Minister of Public Works, Transport and Air Transport said: "Accessibility to many locations in the state is dependent on these facilities, especially in view of the poor or non-existent road network.
"Bosaso airport will constitute a vital trading platform, stimulating local business, economic development, employment and communication with other countries." It is hoped that some of the two million Somali diaspora will return to the country with jobs becoming available through the three projects.
There are also plans to build a seaport which will allow both cargo ships and fishing boats to dock.
Dawood Silman Al Nasur, Lootah's Development of Investment Manager, said: "It is a small port at the moment but we aim to extend it so larger ships can use it. This is a stepping stone to increasing trade and will come with its own risks of security and stability which we are addressing."
The Intergratia Business Group, a subsidiary of Lootah, has signed a 10-year agreement to co-manage the customs facilities at Bosaso.
Puntland has an abundance of lobster, tuna and other seafood off its shores which the president believes, with regulated trade, could be worth millions of dollars.
In his dealings with the international community he has long called for help to secure the waters of Somalia from illegal fishermen from Kenya but says that this appeal, along with others to curb piracy, have often been ignored.
"We have a coast of 1,600km and unfortunately there is a big problem with illegal fishing in our waters, which we have had no assistance in fighting," he said.
"The international community talks about tackling pirates but it is not at sea where the battle is, it is on the land. That is where they need to be fighting this problem, at its base."
He said Puntland's police force had captured seven pirate vessels and imprisoned 100 pirates so far this year.But just a day after the Lootah deal was signed, two suicide bombers – from outside Puntland, according to the president – killed six intelligence staff.
Although, an isolated incident it adds to the challenges facing Puntland. But the fact the government has hope and longed-for foreign investment means that small steps are being taken to make the state a prosperous and stable place.
The UAE is one of Puntland's main trading partners. Livestock, dry fish and fresh seafood are exported to the UAE; Puntland relies on the Emirates for essential commodities, petroleum, food, electrical equipment and construction material.
Some 48.3 per cent of Puntland's exports are destined for the UAE and 5.1 per cent of imports come from
the UAE. "We have historical relations with the Gulf countries going back centuries; all of our commerce depends on the Gulf and all of our imports come from the UAE." said Puntland President Mohamoud Musa Hersi Adde.
Dubai International Airport is one of the few international airports to accommodate Puntland's Daallo Airlines, making it a trading hub for the semi-autonomous state.
Puntland is a region in north-eastern Somalia. Unlike neighbouring Somaliland, it does not seek outright independence.
The name is derived from the Land of Punt mentioned by ancient Egyptian sources, which is believed by some to have existed in what is now Somalia.
Puntland has 1,600km of coastline, which is abundant with fish and other natural marine resources. However, after the collapse of the Somali central government in 1991, the coast was left unguarded against foreign intruders.
Puntland exports great quantities of seafood such as lobsters, dried fish, shark vines and tuna. Sea salt is also produced along with frankincense, gum arabic.
The official languages of Puntland are Somali and Arabic.
It has a land area of 250,000 sq km and a population of 2.4 million people, based on 2003 estimates.
Source: Business247, Nov 08, 2008