Berbera Port Special Economic Zone: Golden Calf or Trojan Horse?

The African country of Somalia has been designated a ‘failed state’ because of its persistent warfare, the presence of terrorist groups and the collapse of the central government. There is no effective rule of law and little protection of the private sector. The only real forms of income for the country are international assistance and remittances received from overseas Somalis. One possible means of increasing economic activity is to build a special economic zone in connection with Berbera Port, which has historically been an important trading centre linking East Africa and West Asia. Dubai’s DP World signed a contract to provide just such a development, but that agreement has subsequently been repudiated as a result of diplomatic issues. Meanwhile, China is seeking to extend its engagement in the region. Investment from either of these two sources would be problematic but it seems there are no other options available. Is it possible for Somalia to pursue a policy of economic development under current conditions without ceding sovereignty of its territory and its economic activities? Would it matter if this did happen? This case would be useful for students taking courses in international business or the political economy of international business.