FOR centuries, the Hanish Islands were deemed nuisances to navigators - floating volcanic deserts in the Red Sea that got in the way of ships and were too bleak to inhabit.
But when a territorial dispute over the two islands erupted in December between former allies Yemen and Eritrea, killing more than 10 people, it signaled big changes in a small neighborhood.
The islands have been used for centuries by fishermen from both countries. But Eritrea now claims them as its own as part of its plan to rebuild after 30 years of war with Ethiopia.
The Red Sea offers untold potential wealth in fishing, shipping, tourism, and perhaps even oil. And Eritrea's government is inviting investors to exploit its 1,200-mile coastline as an alternative to seeking foreign-aid handouts.
The dispute with Yemen has cooled for now, and Eritrea hopes to resolve it in the World Court at The Hague. The dispute hasn't deterred foreign businessmen from coming. "This is the year of closure of deals," says US Ambassador to Eritrea Robert Houdek in Asmara, the capital. "The investment boom is only starting now."
The most visible evidence of Eritrea's ambitions is to restore the glory of the port city of Massawa, called the "Pearl of Africa" by its former Turkish and Italian occupiers and once a busy shipping center. Bombed in 1991 and 1992, its mayor, Tewelde Andu, now boasts that much of the town has been rebuilt, and water and electricity restored.
With Arabic mosques, arcades, and white sands, the city is a logical tourist attraction to visitors from countries such as Saudi Arabia, just a short flight away. An American company, Development Concepts, has signed a $220-million deal to build a luxury hotel complex in the Dahlak Islands off Massawa. Construction of other hotels is under way.
The government is also encouraging recreational divers to explore the waters off Eritrea's 350 mostly uninhabited islands, whose reefs harbor a wide range of exotic fish.
But the real focus is on edible fish, especially now that many European fishing grounds are exhausted, says Saleh Meky, Eritrea's US-trained minister of marine resources. Potential exports could amount to 80,000 tons a year. "Fishing is the only available resource we have at the moment. It's a source of protein, employment, and hard currency," he says.
Besides providing foreign currency, Eritrean officials are teaching citizens long-forgotten fishing skills so they can feed and employ themselves.
Hopes for big money lie under the sea. Anadarko, a Houston-based company, recently signed a seven-year, $28 million offshore oil-exploration deal. Experts say the prospects for finds are good.
Eritrean officials say there is still a long way to go in building infrastructure. Roads are being rebuilt, an new international airport for Massawa is still a dream, and hotel rooms are scarce.
For those businessmen willing to take a risk, "There are prime business opportunities here," says Eraki Tesfai, one of the 1,000 or so Eritreans who have returned after years of exile in the United States. His track-lit restaurant, Bologna, caters to a growing community of fellow returnees and expatriates. He says that after Los Angeles, it's the good life - low costs and virtually no crime. His only complaint is that basil is hard to find.