Why Somaliland Matters and Is Catching the Attention of Global Investors

Somaliland declared independence from Somalia in 1991 after the collapse of Siad Barre’s regime. Though unrecognized internationally, it has spent three decades building state institutions. The Somaliland shilling was introduced in 1994, passports were issued from 1996, and the first multiparty elections were held in 2003. Parliamentary elections followed in 2005, and a peaceful transfer of power occurred in 2010, something rare in the Horn of Africa. Terrorist groups, including al-Shabaab, have failed to establish a meaningful presence. Hargeisa remains one of the safest capitals in the Horn, and visitors move without heavy security details.

While many African nations spent this period lobbying for aid and IMF or World Bank loans, Somaliland quietly built a functioning state. Its progress contrasts with larger African economies. Nigeria enjoyed spurts of growth driven by oil booms and foreign investment, but is now languishing with an imploded naira, fractious politics, and multinationals regularly announcing their exits. South Africa thrived after 1994, but the past few decades it has struggled to manage what was inherited and growth has been abysmal hovering at around 1% per annum, among the lowest in the world.

Ethiopia’s Lifeline to the Sea

Ethiopia, Africa’s second most populous nation at 126 million people, became landlocked in 1993 when Eritrea gained independence. Since then, 90-95 percent of its maritime trade has moved through Djibouti, creating a strategic chokepoint for a high-potential economy which desperately needs more certain access to the sea. Somaliland offers an alternative.

Talks between Addis Ababa and Hargeisa intensified in 2024, with Ethiopia signaling readiness to grant recognition in exchange for port access and potential naval facilities. For Somaliland, such a deal would be a historic step toward legitimacy. For Ethiopia, it diversifies sea access and reduces reliance on Djibouti.

The Berbera port, backed by DP World’s $442 million investment, is already handling modern container traffic and is connected to Ethiopia by a new Berbera Corridor highway. These links make Berbera a viable logistics hub and position Somaliland as a critical node for regional trade flows.

Strategic Bases and Global Rivalry

The Gulf of Aden, where Somaliland strategically sits, carries 10 to 12 percent of global trade and much of Europe and Asia’s oil imports. Control of this corridor has long been a prize for global powers, particularly China, which relies on oil imports from the gulf to keep its economy going.

China established its first overseas military base in Djibouti in 2017 and has invested billions into port and infrastructure projects across the Horn. Beijing has courted Somaliland but was rebuffed, particularly after Somaliland deepened ties with Taiwan in 2020 by exchanging representative offices. Nearly half of its crude imports pass through the Strait of Hormuz, a maritime chokepoint adjacent to the Gulf of Aden, while the Middle East supplies almost half of its total oil needs.

To entice Washington to officially recognize Somaliland, recent overtures have been made to offer the U.S. military a base near the entrance to the Red Sea, as well as critical mineral concessions. A potential base in Berbera would complement existing facilities in Djibouti but provide earlier visibility over shipping lanes and additional strategic depth. Unlike Djibouti, which hosts both U.S. and Chinese forces, Somaliland is firmly aligned with Washington. Expanding into Somaliland would counterbalance China’s presence and secure a partner in one of the world’s most militarized maritime corridors.