Image: Gallo-Getty

Somali residents seek refuge in an old church during conflict.

Britain will contribute 20 million pounds ($32 million) to the "stability fund" and the United Arab Emirates and Scandinavian countries are also expected to chip in to the fund, one of a number of initiatives set to be agreed at Thursday's conference, British officials say.

The idea is to use the money to underpin hard-won military and political gains in Somalia with projects ranging from setting up markets and reopening schools and hospitals to securing water supplies and funding power-sharing negotiations.

Britain's International Development Secretary Andrew Mitchell said Somalis would be offered help from the fund if they could show there was an accountable power structure in their area, supported by local people.

If they could demonstrate this, "we will help you with education, we will help you with healthcare, we will help you with police, security, building up the sinews of justice, food security as well," he told Reuters in an interview on Tuesday.

Somalia has long been known as one of the world's most lawless countries and as a base for pirate gangs that have terrorised sailors and cost the world economy billions.

British nationals are among the ranks of foreign fighters trained by Somalia's al Shabaab Islamist militants, posing a threat to British security.

Mitchell described the East African nation as "deeply dysfunctional" and "an exporter of direct threats to the region and to the wider world, including Britain" through piracy and terrorism.

"There are more British passport holders training to do us ill in Somalia than there are in any other country in the world," he said.

OPPORTUNITY

But Mitchell and other British officials see an opportunity for progress in Somalia, which is why they have organised this week's conference, which will bring together leaders from Somalia and neighbouring countries with U.N. Secretary-General Ban Ki-moon and U.S. Secretary of State Hillary Clinton.

An African force, made up of Ugandan and Burundian troops, has claimed a series of recent successes against al Shabaab fighters who had seized much of Somalia's centre and south. The African force, known as AMISOM, wrested control of the capital Mogadishu from al Shabaab last August.

Kenyan and Ethiopian troops have launched incursions into Somalia that have intensified pressure on the militants.

A U.N. resolution that would boost the 12,000-strong AMISOM force by nearly half could be voted on by the Security Council on Wednesday, the eve of the London conference.

Mitchell said the conference would also launch a new mechanism to tackle corruption by supervising Somali revenues and aid flows. International donors will work with the Somali government on the new Joint Financial Management Board.

The initiative is "about bringing some clarity to the way in which the revenues that Somalia gets from the airport and from ports are used for the interests of the people of Somalia and not stolen by elites," Mitchell said.

His ultimate aim is that the patchwork of different power bases in Somalia should send representatives to a constituent assembly that could draw up a new constitution for Somalia.

Mitchell admits the plan will not be easy. "There are no magic solutions to this. It will be hard pounding," he said.

At the conference, Mitchell will drive home the importance of donors continuing to lend humanitarian support to Somalia even though a famine that killed up to 100,000 people in the country has eased.

"What we need to ensure is that the international community continues to attach a high priority to helping inside Somalia in every way we can so it doesn't slip back into famine ... This is a very, very fragile situation," he said.

Somalia, Kenya, Ethiopia and Djibouti were hit last year by the worst drought in decades. At one point, some 750,000 Somalis faced imminent starvation. The number had fallen to 250,000 by last November, the United Nations said.

Britain would provide 36 million pounds to pay for healthcare and food for Somali refugees in Kenya and a further 15 million pounds for refugees in Ethiopia, both over three years, as well as giving more than 55 million pounds of humanitarian aid to drought-hit Somalis in 2012, British officials said.

In the fight against piracy, Britain will fund the construction of a new centre in the Seychelles that will coordinate and analyse intelligence to turn it into evidence that can be used to prosecute pirates.