By Mohamed Dubo
By disentangling geopolitics from growth, Mogadishu is betting on sovereignty as an economic asset.
At first glance, Somalia’s decision to cancel its bilateral agreements with the United Arab Emirates might appear economically counter-intuitive. The UAE has been one of the most active Gulf investors in the Horn of Africa, with commercial and security arrangements tied to ports that lie along one of the world’s most strategically significant trade corridors.
Yet beneath the diplomatic drama lies a quieter economic logic: Somalia is attempting to reclaim policy coherence, fiscal sovereignty and bargaining power in a region where fragmented authority has long diluted national returns from strategic assets. In short, Mogadishu is re-pricing sovereignty — converting territorial integrity into economic leverage.
The Red Sea: A $1 trillion-plus Trade Artery
Neither an abstract geopolitical concern nor a distant theatre, the Red Sea is an economic super-highway. The Suez-Red Sea corridor handles roughly 10–15 per cent of global seaborne trade, moving goods between Asia, Europe and the Mediterranean via the Bab el-Mandeb chokepoint. Nearly 30 per cent of the world’s containerised traffic transits this route, including vast quantities of manufactured goods and time-sensitive freight. Around 9 per cent of global oil exports and significant volumes of liquefied natural gas also pass through Bab el-Mandeb annually. Before recent disruptions, more than 20,000 vessel calls used the corridor each year, embodying its centrality to global supply chains.
These numbers make the Horn of Africa — and Somalia’s coastline — a natural junction of maritime traffic, logistics services, bunkering, ship repair and freight processing. It is route that is worth billions in direct and indirect economic activity.
Under previous arrangements with the UAE, many of the economic benefits of this traffic leaked away from Mogadishu’s central government:
Firstly, under the status quo, ports such as Berbera, Bosaso and Kismayo became hubs for Emirati-linked infrastructure and commercial activity. But key financial incentives flowed not into Somalia’s federal budget, but instead to regional administrations or special purpose vehicles outside central fiscal control or concession fees and tax arrangements skewed toward foreign investors, at times with limited reinvestment commitments.
Without unified federal oversight and transparent revenue-sharing frameworks, Mogadishu saw limited increases in national tax receipts from maritime throughput — depriving the sovereign budget of a critical revenue stream that could underwrite social services or infrastructure spending.
Secondly, diplomatic and economic engagement was often personalized through regional leaders, effectively allowing foreign capital to negotiate on behalf of parts of Somalia rather than on behalf of the Somali state. This fragmented approachundermined the capacity to harmonise tariffs and customs across ports and further complicated the establishment of a national Electronic Cargo Tracking Note (ECTN) system that could capture all cargo values for taxation and compliance (although Mogadishu is now enforcing such tools).
Thirdly, despite its position on a major trade route, Somalia’s maritime services sector — including ship repair, provisioning, bunkering and trans-shipment — remained undeveloped relative to peers such as Djibouti or Gulf ports. This was partly because external actors orchestrated services through offshore entities, limiting local participation and value-capture.
Finally, dependency on a single partner. The UAE was effectively the dominant Gulf partner. While this attracted capital, it also contracted Somalia’s economic diplomacy, reducing bargaining power with other investors and multilateral financiers seeking stable, transparent jurisdictions.
Away from the status quo, it is also important to note that recent security disruptions in the Red Sea have had macroeconomic spillovers that matter for Somalia’s trade prospects: Shipping volumes through the Red Sea corridor plunged sharply during heightened insecurity, with cargo volumes down more than 20 per cent in early 2024 as vessels diverted around the Cape of Good Hope; at times, overall vessel traffic was nearly halved compared to historical levels, raising freight costs and insurance premiums; and the collective impact has been to slow throughput across regional ports — including those in neighbouring states — increasing operational costs and dampening demand for port services.
For Somalia, which aspires to become a regional trans-shipment and logistics hub, this underscores the importance of securing safe maritime corridors — something that cannot be achieved through external outsourcers alone.
A Strategic Reset with Economic Purpose
Somalia’s recalibration away from unilateral UAE arrangements should not be mistaken for an anti-foreign investment turn. Instead, it signals a shift toward sovereignty-anchored economic strategy where Somalia is able to unify its investment governance, enabling all major port and logistics deals to go through federal oversight; provide competitive tendering for concessions that can attract diversified capital while maintaining clear revenue-sharing; integration into regional corridors, such as the emerging India–Middle East–Europe corridor, that could bring sustained demand for Somali services if Somalia positions itself as a reliable node; and lastly capture of indirect economic rents, from bunkering to ship repair and value-added logistics, rather than primarily concession fees.
In this light, stepping back from lopsided arrangements with a single Gulf state may actually enhance Somalia’s economic attractiveness to a broader investor base — from global shipping lines to global infrastructure financiers.
From Concessions to Sovereign Value-Capture
Somalia’s break with the UAE is often portrayed in geopolitical terms. Yet the economic logic — restoring sovereignty to unlock value from the corridor that carries over a trillion dollars of trade annually — is equally compelling.
By unifying its approach to foreign investment, shoring up revenue systems, and ensuring that its strategic maritime geography benefits all of Somalia, Mogadishu may, paradoxically, gain more by walking away from the old status quo than it would have by clinging to patronage-geared deals.
For a nation long defined by external agendas, the most radical economic reform may simply be this: choosing when, how and on what terms to engage — and ensuring its geography becomes an asset, not a concession.
Mohamed Dubo is the Director of SOMINVEST, with extensive experience in Strategic Communications, Investment Promotion & Diplomacy.