African peacekeepers are patrolling the streets of Mogadishu, helping secure the capital for a new government bent on overcoming decades of chaos after the collapse of Siad Barre's rule in 1991.

At the State Department, Secretary of State Hillary Clinton and Somali President Hassan Sheikh Mohamud marked the restoration of formal ties. President Mohamud said it's the start of a new era.

"Somalia is emerging from a very long, difficult period. And we are now moving away from instability, extremism, and piracy to an era of peace and development," Mohamud said.

Secretary Clinton called the occasion a testimony to Somali determination.

"The people and leaders of Somalia have fought and sacrificed to bring greater stability, security, and peace to their nation. There is still a long way to go and many challenges to confront. But we have seen a new foundation for that better future," Clinton said.

As President Mohamud's government restores services, including education, health care, and public safety, Somali refugees are beginning to return home from camps in Kenya.

Forces loyal to the new government fought alongside African peacekeepers to drive back Islamist militants of the al-Shabab group.

For now, President Mohamud still relies heavily on African peacekeepers to keep al-Shabab at bay.

But Secretary Clinton said the international community will continue to back efforts to combat the al-Qaida affiliates.

"The terrorists, as we have learned once again in the last days, are not resting. And neither will we. We will be very clear-eyed and realistic about the threat they continue to pose," she said.

Jennifer Cooke, at the Center for Strategic and International Studies, says President Mohamud faces serious challenges.

"He's still working within a political and a security context that is going to be extremely difficult. Yes, Shabab is being pushed out of some of the big areas. But Shabab doesn't need to do a whole lot to disrupt things in a big way in Mogadishu," Cooke said.

Cooke says President Mohamud's government is untainted by the corruption of its predecessors, but he must still navigate the factionalism and clan patronage of Somali politics.

"He is an individual working within a political context. And so although there is an opportunity here, there is a lot that he has to do within a very narrow time frame to establish himself, his credibility, and the credibility of the institutions that he works within," Cooke said.

Restoring diplomatic ties means Somalia can establish new relationships with U.S. development agencies and with international financial institutions, including the World Bank.

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