There is no escaping the scale of his new assignment. His
office in Mogadishu is surrounded by the bombed out shells of
former banks, symbols of Somalia’s shattered economy and its
broken financial system after two decades of conflict.

“We have to build brick by brick and person by person,” Omer
told Reuters by telephone from the smartly painted central bank,
which stands out against nearby wrecks that once housed Banca di
Roma, Commercial Bank of Somalia and other institutions.

“The task is so daunting,” said Omer, 58, a dual Somali-U.S.
national who left Somalia at 16 and returned this year.

But he is undeterred. Omer aims to issue licences to
commercial banks by the year end, a new currency to replace the
tattered Somali shilling may be on the cards and data is being
gathered to build a picture of prices and other indicators to
chart the informal economy that has emerged in the anarchy.

Omer’s decision to take the central bank job is one more
sign of a delicate recovery underway in the Horn of Africa
nation since its new parliament elected President Hassan Sheikh
Mohamud last year.

Success is not assured. Islamist al Shabaab militants
continue to launch attacks from rural strongholds, clan
divisions run deep and the government has limited control beyond
Mogadishu’s boundaries. But creating a new economic order is
seen as vital to shoring up the shaky peace.

“The absence of commercial banks is a major hindrance … to
any reconstruction and development,” said Omer, who as deputy
chief financial officer helped balance the budget of the
district government of cash-strapped Washington D.C.

The central bank is now offering “provisional licences” so
commercial banks can prepare to comply with anti-money
laundering rules and the other regulations that must be met when
full licences are issued, which Omer plans for the last quarter
of 2013.

“We want to do it methodically and right,” said Omer, adding
foreign banks were interested in licences but did not name them.

Yet years of chaos add complications to that careful
approach. Dahabshiil, a Somali money transfer firm with an
Islamic bank in Djibouti, already offers Islamic banking
services in Somalia under a licence issued by a past regime,
though its management says it will comply with any new code.

ROBUST INFORMAL ECONOMY

Dahabshiil is among several money transfer operations,
telecoms firms and others that have survived and even thrived
since the fall in 1991 of dictator Mohamed Siad Barre, whose
Marxist-inspired rule gave way to anarchy under rival warlords
and stringent codes imposed when Islamists militants took over.

“That informal economy is a robust economy,” said Omer, who
has previously said it was growing at 5 to 7 percent a year.

Indicating a growing confidence, Somalia’s battered shilling
has strengthened by about 80 percent in the past two years since
Islamist militants were ejected from Mogadishu by an African
peacekeeping force. It now trades at about 18,000 to the dollar.

But the well-thumbed and ragged notes are in short supply
because they were last printed before 1991 and the biggest
denomination is 1,000 shillings, worth about 5 U.S. cents.

A new currency could be on the way. “There is a unanimous
understanding and agreement on the part of the Somali leadership
that there is a need for a new currency and the central bank of
Somalia will be working on that in due time,” Omer said.

He did not give details, but the former World Bank employee
who trained the Shanghai municipality on bond issues said he
expected support on the issue from the International Monetary
Fund, which in April formally recognised Somalia’s government.

In the vacuum, many Somalis have relied on dollars and found
innovative ways to work without a formal banking system. Mobile
firm Hormuud lets clients make payments or transfers of a few
U.S. cents by text message, vital when the smallest unit
available in Somalia of the U.S. currency is a dollar bill.

“One of the problems in a dollarised economy is breaking
down the one dollar,” said Omer, adding this enterprising spirit
needed to be harnessed as the formal economy was created.

As one of the first steps to that goal, the central bank is
gathering data about inflation and other indicators needed for
policy making. Next week, the bank issues its first economic
report that will go up on its new website www.centralbank.so

“It might not be as useful as other reports around the
world,” said Omer. “But for us it is a giant step.”

Other routine central bank activities, such as issuing
treasury bills, are further off. Omer said debt sales were “at
least 24 months” away. He also said it was too early to discuss
the bank’s reserves.

But in the meantime, he said there were other ways to repeat
his Washington experience in his new post. “What would be
considered a triple A bond for Somalia is … to provide our
people security and quality of life.”

(Editing by Richard Lough and Giles Elgood)

Abdirashid Duale’s company, Dahabshiil – which with a
handful of others has survived the anarchy of the past two
decades – exemplifies a strong entrepreneurial spirit, he says.

Its flagship operation is an international money transfer
business handling hundreds of millions of dollars a year sent to
Somalia, a country still grappling with an Islamist insurgency.

“The more people invest in the country, the more they have
ownership … the more they will look after their security and
have an interest in the future of their community,” Duale said
in a telephone interview.

He was speaking while attending a conference in London this
week to attract international support for rebuilding Somalia,
where guns are rife and a new government has only tenuous
control beyond the limits of the capital Mogadishu.

Though still fragile, the leadership elected last September
marks a dramatic advance after 20 years of turmoil when the
nation fell apart. A patchwork of warlords gave way to Islamist
militants, while transitional governments came and went.

That chaos swept away the state-run economy of dictator
Mohamed Siad Barre and left a vacuum in which some innovative
Somalis created private airlines, set up 3G mobile services and
kept finances flowing without a functioning financial authority.

“The government can come and go, it is the people who stay
in the country,” said Duale, who joined his father’s business
while at school. “Somalis are very entrepreneurial.”

His family business testifies to that view. Founded in 1970,
Dahabshiil collapsed in 1988 when civil conflict took a hold,
but has since been rebuilt with offices in Somalia, other
African states, London and Dubai.

CROSSING THE LINE

“There is a Somali style of dealing with challenges,” Duale
said, explaining how his company has faced hurdles few others in
the financial world have to deal with.

His money transfer and banking business has had to build a
high degree of trust from customers, who send their cash to a
nation without a fully functioning regulator.

It requires overcoming suspicions between clans that were
deepened by conflict. “We cross the clan line,” said Duale,
running what he calls Somalia’s biggest private sector employer.
“We employ lots of people who have local knowledge.”

Dahabshiil relies on its own security arrangements for
protection because the police force of poorly trained and
low-paid officers struggles to impose the law.

A company office in Mogadishu was bombed last month and
militants ordered it closed. Wary of threats, Dahabshiil does
not divulge its financial details to avoid drawing “unwanted
interest” that could endanger staff or the group’s operations.

Instead, Duale referred to a U.N. estimate that $2 billion
was sent to Somalia a year, and he said Dahabshiil handled a
“large part of that amount” without being more specific.

The scale of the business is evident from the prominent
Dahabshiil billboards across Mogadishu, although the Somali
headquarters are in Hargeisa, the capital of the breakaway
Somaliland region.

Other businesses are growing, too. Hotels, restaurants and
the odd shopping mall are opening in Mogadishu and some Somali
businesses accept Dahabshiil’s debit card.

The card, a novelty for Somalia when launched in 2009, is a
welcome alternative to the ragged Somali shilling banknotes
printed in the 1980s that still circulate. Many use dollars.

The more stable outlook has helped boosted the shilling by
some 80 percent since 2011 to around 18,000 to the dollar.

Other indicators are harder to come by, but officials say
Somalia’s average per capita income of $284 is higher than 12
nations below it with more stable governments.

(Editing by Richard Lough, Ron Askew)

It will be his first trip to a Western capital since his election in March. Britain and other countries said before his victory that, if he won, they would only have “essential contacts” with him because of the court case.

“Kenya is a vital partner on Somalia and we judge our contact according to the issue concerned,” a spokesman for Britain’s Foreign Office said.

Kenya was playing a crucial role in stabilizing neighboring Somalia and housing refugees, he added.

A source close to the Kenyan presidency and a diplomat both said Kenyatta was likely to travel to the meeting, which aims to build international support for Somalia, where Kenyan troops have battled Islamist militants.

The move reflected the West’s desire to keep Kenya as a stable ally at the expense of other principles, Kenyan rights activist GeorgeMorara said.

“It is a U-turn in the UK and the Western world’s approach to the whole issue of impunity,” Morara said.

The March election passed off peacefully, a relief to many Kenyans after ethnic violence erupted following the vote five years ago. The charges against Kenyatta’s in The Hague relate to allegations he had a role in orchestrating bloodshed last time.

Western states view Kenya as an ally in their battle against Islamist militancy in the region and it has sent about 5,000 troops to Somalia as part of an African force that has driven back al Shabaab Islamist fighters.

The British spokesman said the decision to invite Kenyatta was taken in part because the president had committed to cooperating with the court in The Hague.

Britain’s high commissioner (ambassador) to Kenya, Christian Turner, whose remarks about essential contacts had angered Kenyatta’s backers in the former British colony, offered the invitation during a meeting with him on Wednesday.

After the election result, Western diplomats had privately indicated that they would take a pragmatic or “flexible” approach in assessing the level of contacts with Kenyatta, 51.

As well as concerns about alienating an ally, Western powers are wary of jeopardizing trade ties with east Africa’s biggest economy and worry the diplomatic wrangle could open the way for China and other Asian states to extend their influence.

(Writing by Edmund Blair; Editing by Angus MacSwan)

Mohamud Hassan Suleiman can count on a wave of goodwill on
his travels but needs more than diplomatic backing to steady a
nation emerging from two decades of war and anarchy with debts
of $2.2 billion and state revenues of just $84 million a year.

For the first time in years, Western and other nations have
accredited ambassadors to the new government of President Hassan
Sheikh Mohamud, although most still live outside Somalia. His
government has also won recognition from the International
Monetary Fund, an important step on the road to rehabilitation.

But gains on the ground are shaky, demonstrated in bloody
fashion on Sunday when al Qaeda-affiliated bombers killed at
least 30 people in Mogadishu, a city without a single working
fuel station and whole neighbourhoods of wrecked buildings.

“Somalia is coming out from a dark period,” Suleiman told
Reuters in a telephone interview, adding Sunday’s attacks in the
capital highlighted the need to support a government that still
relies on African peacekeepers to maintain security.

“They are giving us their attention but we are asking them
to change that to substance,” said the 62-year-old minister, a
banker from the diaspora who once worked at Somalia’s central
bank, an institution he is now seeking to resuscitate.

“It needs money to train the security forces, to equip them
properly and to pay them properly,” he added.

Western states and others have focused on humanitarian aid
till now but efforts are shifting towards bilateral support for
the new government, whose ability to act could have an impact
far beyond the borders of the nation of 10 million people.

A more stable Somalia could help curb piracy, which has
flourished in the political vacuum and according to the World
Bank costs the global economy about $18 billion a year. Western
nations also worry a slide back to chaos will allow al Shabaab
Islamists, ejected from Mogadishu two years ago, to regroup.

But Suleiman said the government needs to show Somalis it
can deliver change, if it is to extend its control beyond
Mogadishu and other urban centres, a difficult task when its
revenues almost all come from a battered port and tiny airport.

GAUGING SUPPORT

“We are doing everything we can, not to disappoint the
people,” said Suleiman, who travels to a donor meeting hosted by
the World Bank in Washington on April 20 before attending a
broader London conference to build support for Somalia on May 7.

The Somali government also wants to draw more backing at a
June 1-3 meeting on African development in the Japanese city of
Yokohama, and at a gathering in September in Brussels.

The meetings will help gauge support for debt relief before
starting a formal process that could see Somalia qualify for the
Heavily Indebted Poor Countries initiative, known as HIPC, that
could offer debt forgiveness and restructuring.

To do that, Suleiman and his government must draw up a
sustainable poverty reduction programme and show Somalia has the
backing of 70 to 80 percent of its creditors, experts say.

“It is going to be a long process and we are just starting
that. HIPC is not something we can use immediately,” he said.

Suleiman put Somalia’s debt at $2.2 billion, although
experts said that was based on a 2010 World Bank figure and
interest accrued since then meant it was probably higher.

About half the debt is owed to the World Bank, IMF and
African Development Bank. Arrears to international financial
institutions (IFIs) must be repaid, whether by Somalia or by
creditors on its behalf, before they can offer new funds.

But IMF recognition was a valuable start, Suleiman said,
adding it “opens doors for us to deal again with the IFIs.”

The 2013 budget figures show revenues of about $84 million,
of which about $54 million is forecast to come from domestic
sources and the remainder in external assistance. Spending is
put at $114 million, leaving a $30 million deficit.

“We are hoping to cover this gap by increasing the revenue
or by external assistance,” said Suleiman, who spent more than
30 years as an international banker – most recently in Britain -
before he joined Mohamud’s government.

His former employer, the central bank, is in no position now
to help out with debt issuance. “We are just undertaking a
comprehensive public finance management reform and the bank is
part of it,” he said, adding it was not yet “fully functioning.”

But the central bank’s freshly painted building is one sign
of a gradual recovery in Mogadishu, where traffic now sometimes
clogs the potholed roads and construction sites have sprouted.

At least one new petrol station has been built but has yet
to open so drivers still rely on vendors selling jerry cans of
fuel on the roadside.

“I believe there is an opportunity,” said the minister. “We
hope to use this opportunity.”

(Editing by Richard Lough; Editing by Jon Boyle)

Although the number of attacks has markedly fallen since
2011 thanks to tougher security aboard ships and increased
Western naval patrols, piracy emanating from the lawless Horn of
Africa nation may still cost the world economy about $18 billion
a year, the bank said in a report released on Thursday.

Pirates operate far beyond Somalia’s waters, disrupting
shipping on global routes in the Indian Ocean and into the Red
Sea. Since the first reported hijacking in 2005, 149 ships have
been seized, raising total ransoms of $315 million-$385 million.

That is a fraction of the amount World Bank in its 218-page
report estimates it costs the world economy from distortions to
trade prompted by piracy. Other bodies give lower estimates.

But the costs of naval operations, guards on ships, higher
insurance and other factors run into billions of dollars.

Piracy incidents have dropped since 2012, but much of that
experts attribute to tougher security at sea. Talk among donors
of offering alternative livelihoods to pirates have had little
impact given that Somalia’s government has limited control over
the country and a pirate’s booty is far higher than other work.

One expert said a pirate who can earn $5,000 in a night’s
work capturing a ship will not be tempted by fishing classes
giving him skills that may earn just a few dollars a day.

“Somalia cannot buy its way out of piracy; nor can the
international community rely solely on its law enforcement
agencies to defeat pirates, whether at sea or on land,” the
World Bank said in its study.

Pirates rely on support onshore to conduct negotiations and
to secure locations from where they can operate. “In turn,
politically powerful figures capture large portions of the
profits associated with piracy,” the report said.

“Any solution therefore will involve forging a political
contract with local stakeholders – a shift in attention, in
other words, from the perpetrators to the enablers of piracy.”

It said the international community and Somali government
needed to tailor development assistance and security initiatives
in locations where pirates operate to win support from the local
power brokers and their communities.

BUILDING A STATE

The report did not list project proposals. One example it
cited was an initiative by a Britain-based non-governmental
organisation offering social and economic developments to local
communities if they help eject pirates and their backers.

“The long-term solution to piracy off the Horn of Africa
cannot be dissociated from construction of a Somali state that
is viable at both central and local levels,” the World Bank
said.

Some experts argue that tough security at sea may already be
cutting the costs of piracy to the world economy and making it a
far less attractive business to both those at sea or on shore.

The Oceans Beyond Piracy advocacy group says the cost to the
global economy was $5.7 billion to $6.1 billion in 2012, far
lower than the World Bank’s estimate.

The World Bank estimates that it would cost between $40,000
and $80,000 to outfit a pirate group. If the chance of a
multi-million-dollar ransom is now slimmer and the danger higher
due to naval action, those with the cash may look at other
ventures.

Alan Cole, regional coordinator for the counter-piracy
programme of the U.N. Office on Drugs and Crime (UNODC) in
Nairobi, said targeting those funding piracy was one part of the
response but not to the exclusion of other aspects.

“It’s a combination of things. It’s certainly got more
dangerous (for pirates) to be at sea,” he said. “Coupled with
that, there is less coastline available to pirates.”

Authorities in Somalia’s northern Puntland region have tried
to crack down on piracy, while an African Union force has helped
deny pirates parts of the south as troops pushed out al Shabaab
Islamist militants, a group seen as a beneficiary from piracy.

Cole also pointed to the challenge of going after the
organisers on land. He said he was not aware of a single case
where a businessman backing piracy ventures was prosecuted,
while some 1,200 pirates were now in jail around the world.

“With a crime of this complexity you have got to go after it
everywhere,” he said. “The international community has had less
success in arresting the organisers than it has arresting the
young men in the boats. That needs to change.”

(Editing by Richard Lough and Mark Heinrich)

After a calm election that followed a bloodbath five years ago, many Kenyans hope Kenyatta will deliver on his promise to be a president for all and not just work for his own ethnic group, a practice they have come to expect from politicians.

For Western states, big donors to east Africa’s largest economy, Kenya is a vital player in the regional battle against militant Islam. But they now have to juggle their wish for close ties with a policy of limiting contacts with those indicted by the International Criminal Court (ICC) in The Hague.

The United States and European powers sent ambassadors to Kenyatta’s inauguration – a level of representation diplomats said was not unusual for such an event but still in line with having only “essential contacts” with indictees.

Kenyatta pledged to “be faithful and bear true allegiance to the Republic of Kenya” in his oath taken on a bible used by his father, Jomo Kenyatta, who was Kenya’s first president after independence in 1963 from British rule.

The peaceful transition of power has helped rebuild Kenya’s reputation as one of Africa’s most stable democracies. Alongside outgoing President Mwai Kibaki, the ceremony was also attended by Daniel arap Moi, who ruled for 24 years until 2002.

Sitting alongside the Western envoys were about a dozen African heads of state, as well as prime ministers and other top officials. China and India, neither signatories to the statutes that set up the ICC, sent senior government officials.

If the West slips up in its diplomatic balancing act, it risks opening more space to China and other Asian powers that are gaining both political and trading influence in Africa.

“They find themselves in a very difficult position,” said Kenya expert Daniel Branch at Britain’s Warwick University. “My sense is everyone will find some method of accommodation.”

But Western ambassadors were saved one awkward moment. Sudanese President Omar al-Bashir, who is charged with genocide in The Hague and faces an arrest warrant for not cooperating, did not attend, although an official said he was invited.

“NEW BEGINNING”

Tens of thousands of Kenyans, many waving flags, roared in support as Kenyatta took the oath.

“This is a new beginning,” said Elija Toroitich, a 56-year old farmer at the stadium who voted for Kenyatta and his deputy William Ruto, also facing ICC charges. “We expect a lot from them due to the pledges they made in their manifesto.”

He and others want Kenyatta, a 51-year-old former finance minister whose family controls a sprawling business empire, to deliver faster economic growth and help swathes of poor in the nation of more than 40 million people.

“My government will work with and serve all Kenyans without any discrimination whatsoever,” Kenyatta had said in an address after winning the March 4 vote. His victory was upheld by the Supreme Court following a challenge by his rival Raila Odinga.

Kenyatta and Ruto have promised to cooperate in The Hague to clear their names, denying charges of crimes against humanity and allegations they helped organize tribal-fuelled violence after the disputed 2007 election in which 1,200 were killed.

In the 2007 election, Kenyatta, from Kenya’s largest tribe, the Kikuyu, and Ruto, a Kalenjin, had backed rival candidates.

Western diplomats have indicated they will take a “pragmatic” line in dealing with Kenyatta’s government, but said much would depend on his cooperation with the court.

In an early sign of Western determination to keep a close partnership with Kenya, U.S. Ambassador Robert Godec met Kenyatta last week for the first time since his election and EU ambassadors put in a request for a session with him.

“We will continue to engage with the government of Kenya,” said one European diplomat, saying that the ICC charges were against individuals, not the nation.

An EU official said the meeting requested with Kenyatta aimed to “clear the air” over speculation that the West would impose sanctions on Kenya if Kenyatta won. “No one is talking of sanctions,” the official told Reuters.

Although some Kenyatta aides talk of a swivel east if the West spurns Kenya, the U.S.-educated Kenyatta may be just as concerned about any deterioration in ties with the EU, a big donor and significant importer of Kenyan produce, and Washington, which provides about $900 million in aid a year.

An Asian diplomat said Kenya could not easily switch away from Western markets, even if ties with Asia were growing.

(Additional reporting by George Obulutsa; Writing by Edmund Blair; Editing by Richard Lough and Pravin Char)

Many Kenyans hope the son of the nation’s independence hero will live up to his pledge to be a leader for all and not just work for people from his own ethnic group, a practice they have come to expect from their politicians.

For Western states, big donors to east Africa’s biggest economy, Kenya is a vital player in the regional battle against militant Islam. But they now have to juggle their wish for close ties with a policy of limiting contacts with those indicted by the International Criminal Court (ICC) in The Hague.

The United States and European powers said they would send ambassadors to attend Kenyatta’s inauguration ceremony – a level of representation diplomats said was still in line with their position of having only “essential contacts” with indictees.

“They find themselves in a very difficult position,” said Kenya expert Daniel Branch at Britain’s Warwick University. “My sense is everyone will find some method of accommodation.”

If the West slips up, it also risks opening more space to China and other Asian powers that are gaining both political and trading influence in Africa.

Sitting alongside the Western envoys will be about a dozen African heads of state, as well as prime ministers and other top officials. China and India, neither signatories to the statutes that set up the ICC, are sending senior government officials.

But Western ambassadors will be saved one awkward moment. A Kenyan official said the ceremony would not be attended by Sudanese President Omar al-Bashir, who is charged with genocide in The Hague and faces an arrest warrant for not cooperating.

Tens of thousands of Kenyans, many waving flags, gathered for the ceremony at a Nairobi stadium from the early morning.

“This is a new beginning,” said Elija Toroitich, a 56-year old farmer at the stadium who voted for Kenyatta and his deputy William Ruto, who also faces ICC charges. “We expect a lot from them due to the pledges they made in their manifesto.”

He and others want Kenyatta, a 51-year-old former finance minister whose family controls a sprawling business empire, to deliver faster economic growth and help swathes of poor in the nation of more than 40 million people.

PRAGMATIC APPROACH

“My government will work with and serve all Kenyans without any discrimination whatsoever,” Kenyatta said in an address after his election victory was upheld by the Supreme Court following a challenge by his main rival Raila Odinga.

Kenyatta and Ruto have promised to cooperate in The Hague to clear their names, denying charges of crimes against humanity and allegations they helped organize tribal-fuelled violence after the disputed 2007 election in which 1,200 were killed.

In the 2007 election, Kenyatta, from the Kenya’s largest tribe the Kikuyu, and Ruto, a Kalenjin, supported opposing presidential candidates.

Western diplomats have indicated they will take a “pragmatic” line in dealing with Kenyatta’s government, but said much would depend on his cooperation with the court.

In an early sign of Western determination to keep a close partnership with Kenya, U.S. Ambassador Robert Godec met Kenyatta last week for the first time since his election and EU ambassadors put in a request for a session with him.

“We will continue to engage with the government of Kenya,” said one European diplomat, saying that the ICC charges were against individuals, not the nation.

An EU official said the meeting requested with Kenyatta aimed to “clear the air” over speculation that the West would impose sanctions on Kenya if Kenyatta won. “No one is talking of sanctions,” the official told Reuters.

Although some Kenyatta aides talk of a swivel east if the West spurns Kenya, the U.S.-educated Kenyatta may be just as concerned about any deterioration in ties with the EU, a big donor and significant importer of Kenyan produce, and Washington, which provides about $900 million in aid a year.

An Asian diplomat said Kenya could not easily switch away from Western markets, even if ties with Asia were growing.

A big portion of Kenya’s horticultural exports head to Europe and many tourists, another source of hard currency, come from there. Western oil and gas firms are also major players in Kenya’s emerging hydrocarbons industry.

(Writing by Edmund Blair; Editing by Richard Lough and Pravin Char)

Western states regard Kenya as crucial to regional stability and have supported the role played by Kenyan and other African troops in efforts to push back al Qaeda-affiliated Islamist militants in neighboring Somalia.

The United States and European powers said they would send ambassadors to attend Kenyatta’s inauguration ceremony – a level of representation diplomats said was still in line with their position of having only “essential contacts” with indictees.

It is part of a delicate balancing act that seeks to retain a policy of limiting contacts while avoiding driving east Africa’s biggest economy closer towards China and other emerging Asian powers that have been gaining influence on the continent.

“They find themselves in a very difficult position,” said Kenya expert Daniel Branch at Britain’s Warwick University. “My sense is everyone will find some method of accommodation.”

Sitting alongside the Western envoys will be about a dozen African heads of state as well as prime ministers and other top officials. China and India, neither signatories to the statutes that set up the ICC, are sending senior government officials.

But Western ambassadors at the stadium on the outskirts of Nairobi will be saved one awkward moment. A Kenyan government spokesman said the ceremony would not be attended by Sudanese President Omar al-Bashir, who is charged with genocide in The Hague and now faces an arrest warrant for not cooperating.

Kenyatta and his deputy president, William Ruto, who is also facing charges of crimes against humanity, have both promised to work with the court to clear their names of charges they deny.

Western diplomats have indicated they will take a “pragmatic” line in dealing with Kenyatta’s government, but said much would depend on his cooperation with the court.

He is accused of orchestrating tribal blood-letting after the disputed vote five years ago that killed 1,200 people.

A dispute over who won the election this time was played out peacefully in court. The victory by Kenyatta, who is the son of Kenya’s founding president, was upheld.

ENGAGING

Many Kenyans hope that Kenyatta, a 51-year-old former finance minister, will now deliver a swift improvement in the economy, which has yet to return to the 7 percent growth rate attained before the December 2007 vote.

In an early sign of Western determination to keep a close partnership with Kenya, U.S. Ambassador Robert Godec met Kenyatta last week for the first time since his election and EU ambassadors put in a request for a session with him.

“We will continue to engage with the government of Kenya,” said one European diplomat, noting that the ICC charges are against individuals, not the nation.

An EU official said the meeting requested with Kenyatta aimed to “clear the air” over speculation that the West would impose sanctions on Kenya if Kenyatta won. “No one is talking of sanctions,” the official told Reuters.

Although some Kenyatta aides talk of a swivel east if the West spurns Kenya, the U.S.-educated Kenyatta may be just as concerned about any deterioration in ties with the EU, a big donor and significant importer of Kenyan produce, and Washington, which provides about $900 million in aid a year.

An Asian diplomat noted that Kenya could not easily switch away from Western markets, even though he said ties with Asian nations were growing.

Warwick University’s Branch said Kenyatta was keenly aware of the need to keep steady relations with the West. “Kenya is part of the global economy and markets in the EU are far too important,” he said.

A big portion of Kenya’s horticultural exports head to Europe and many tourists, another source of hard currency, come from there. Western oil and gas firms are also major players in Kenya’s emerging hydrocarbons industry.

(Editing by Mark Heinrich)

Chief Executive Keith Hill, whose Canadian-listed firm has interests in its 12 blocks covering 250,000 sq km in the region, told Reuters about $468 million would be spent in 2013 to drill at least 10 wells in Kenya and other locations in east Africa.

Oil discoveries in Uganda and gas finds offshore Tanzania and Mozambique have drawn more explorers to east Africa, now seen as a potential major new producing region.

In Kenya Africa Oil and partner Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) have discovered oil in their license blocks 10BB and 13T but still need to confirm commercial quantities.

“We plan to drill at least 10 wells this year and then I think we will drill that many, if not more next year,” Hill said, speaking during the Reuters Africa Investment Summit, adding the firm and its partners would spend about $468 million.

“We will need somewhere between 300 and 500 million barrels to justify a pipeline and with the drilling program we have got this year it’s possible we will start getting close to those thresholds by the end of the year,” he said.

“But it’s really hard to predict. It would depend on the success of the upcoming wells,” he added, speaking in Nairobi.

Hill said the authorities in Kenya and also in Ethiopia, where Africa Oil has interests in four blocks, had assured him that terms would remain attractive for explorers and governments.

Africa Oil also has interests in two blocks in the Somalia’s semi-autonomous Puntland region.

Asked whether Africa Oil would consider any acquisition approaches for his firm from bigger players eyeing the region, he said Africa Oil was still in a phase where it wanted to determine the full scope of the prospects on its acreage.

“There is obviously a possibility that we will get a monetary offer to just take us out completely at some point. I don’t think we are actively looking to do that in the near future,” he said.

Africa Oil and partner Tullow’s most recent oil find in Kenya was the Twiga South-1 well in Block 13T, about 30 km (19 miles) west of and on a geological trend with its previous Ngamia-1 oil find on Block 10BB.

Twiga South-1 was flow tested, with Africa Oil and Tullow predicting a total combined flow rate of over 2,850 barrels of oil per day for the well.

Hill said this year three of their six drilling rigs in the region will be dedicated to Blocks 10BB and 13T, where they plan to drill at least five wells this year.

“So that will be a real focus for us this year. That is where we made the two discoveries at Ngamia and Twiga. So it will be following up those discoveries, drilling what we call the String of Pearls,” Hill said.

Africa Oil, Tullow and Afren Plc (AFRE.L: Quote, Profile, Research, Stock Buzz) are also partners in Kenya’s Block 10A, where they drilled the as yet inconclusive Paipai-1 well, another keenly-watched prospect in its Kenya-Ethiopia portfolio.

Hill said the well would undergo further tests. (Follow Reuters Summits on Twitter @Reuters_Summits)

(Editing by Greg Mahlich)

Mauritius-registered Catalyst, which in November finished
raising cash for its first closed-end fund, sees opportunities
in a region of about 200 million people, where consumer demand
is rising and a big boost from recent oil and gas discoveries is
expected for the future.

“We are very much focused on consumer demand on the regional
front,” said Catalyst Chief Executive Officer Paul Kavuma in an
interview this week. He left Actis East Africa to found Catalyst
in 2009.

Catalyst this year plans to invest 35 percent of the first
fund in consumer goods, technology, financial services and
industries such as cement and building materials. Kavuma said
some of its first investments were in Tanzania and some of the
most attractive opportunities outside Kenya, the region’s
biggest economy.

Development institutions, such as the World Bank’s
International Finance Corporation, accounted for about 70
percent of cash raised for the first fund, and the rest came
from individuals, insurance firms, fund of funds and others.

The firm may approach the market to raise a second fund in
the next two years, Kavuma said.

Meanwhile, Acre Solutions, a partnership Catalyst has set up
with an international property developer, has identified real
estate projects and expects to start marketing real estate
investment trusts (REITs) in “the next month or two”, he said.

Kenya’s capital markets authority is working to introduce
REITs, securities that trade like stocks on the exchange and
usually offer investors high yields.

A residential project worth $40 million to $45 million will
be its first to market, and the partnership is also working on a
mixed commercial, residential and hospitality development in
Kenya requiring about $2 billion in investment over 10 years,
Kavuma said.

Demand for middle class homes and other housing in east
Africa has outstripped supply for decades, and the sector has
outperformed other asset classes such as stocks and fixed
income.

Catalyst, along with many others, expects the region’s
growing economies and consumer demand to get a further boost
from oil and gas finds, but Kavuma said this would come with a
risk that corruption could rise and transparency suffer.

“There is a risk that the pot of gold is so significant that
we may go backward on our corruption indices and things like
that,” he said.

The net effect would still be positive, he said. “I do not
think the drag will outweigh the benefit.”

(editing by Jane Baird)