Somalia and Ethiopia have announced plans to invest in “four key seaports” and an international highway network as a way of attracting foreign investment. The agreement was reached after a meeting in Mogadishu between President Mohamed Abdullahi Farmaajo of Somalia and Ethiopia’s newly installed prime minister Abiy Ahmed.
Officials did not say which ports would be developed. A joint technical team is to be formed immediately to outline proposals. The development is being view as part of the complicated politics of the region, which is in the shadow of the struggle between the Gulf states on one side and Turkey, Qatar and Iran on the other, as well as Ethiopia’s difficult relations with Eritrea and the position of the breakaway Republic of Somaliland.
In recent years Ethiopia has been moving closer to the UAE, and the announcement follows a pledge from the UAE to give it $3bn in aid. Under the terms of that deal, the money will be used as capital investment in construction projects. The UAE is thought to be interested in investing in industrial parks, which have become an important part of Ethiopia’s strategy of building up an export-oriented manufacturing sector, as well as healthcare and hospitality projects.
One billion dollars will be deposited in Ethiopia’s central bank to ease its foreign currency shortages. These have become so severe that the government has been considering the privatisation of Ethiopia Airlines, Africa’s fastest growing carrier. The UAE and Ethiopia have been growing closer in recent years, and Ethiopia was instrumental in facilitating DP World’s $440m investment last year in the port of Berbera in the Republic of Somaliland.
This move caused diplomatic difficulties with Somalia, which claims Somaliland as its territory, and which passed a law making the investment illegal. The UAE’s investment in Ethiopia, and Ethiopia’s warming relations with Somalia, may improve the situation.