For a generation, Somalia has been the very definition of a failed state, with clan warlords, militias, pirates and bandits battling each other – plundering the country and leaving its people to seemingly perpetual famine. But recently things have shifted dramatically.

Against the odds, the country now has a new constitution and a new parliament that just elected a national unity president. And now that African Union troops have pushed the extremist Islamic militia al-Shabaab out of Mogadishu and the southern port of Kismayo, its last urban stronghold, Somalia finally has some breathing room to try to reconstruct a functioning nation.

How might that go?

Hope ...

Writing in the Guardian, Wadah Khanfar suggests Somalia's time is now, and there is widespread optimism after the election of President Hassan Sheikh Mohamud.

The president is conscious of the enormous responsibility that rests on his shoulders: a state without institutions; a government without resources; a society torn apart by vicious wars; and perplexing regional and international intervention. Despite all this, he is still optimistic. His task in the immediate future is to form a national consensual government, one that will begin to build the organs of state as well as pursue a national reconciliation that will not exempt anyone, even al-Shabaab.

This move to inclusive national reconciliation opens a door of opportunity that Somalia has not seen for years.

... and caution

David Smith, the Guardian's Africa correspondent, is less sanguine. Al-Shabaab is down but far from out, he says, as shown by the group's continued ability to mount successful terror attacks, even in the heart of the capital. And beyond that Smith says, "Perhaps the biggest threat is the vacuum al-Shabaab will leave behind." Al-Shabaab has the capacity to disband into civilian populations and maintain a guerrilla presence. In addition, local militias emboldened by the support of more powerful neighbours like Kenya and Ethiopia could well expect favours or challenge federal authority.

Who really holds the cards?

There's no denying the refreshing optimism currently at play in Somalia – President Mohamud has been received warmly by Somalis and al-Shabaab is in retreat. But the process of state building will take time, patience and a renaissance of civic efficacy: currently $7 out of $10 in revenue never make it to government coffers. And as Khanfar reiterates, Mohamud's success or failure will depend largely on how the world responds.

Five years ago Somalia's fledgling government was destroyed by a US-backed invasion to quash Islamic extremism. Since then global engagement with Somalia has been largely focused on the "war on terror" and the "war on piracy", both of which have fuelled extremists and corrupt leaders to hold the people of Somalia hostage.

Now, global powers must change tack and invest in nation building and unification. With political support from Turkey, money from regional partners in the Gulf, and the new model of north Africa's Arab spring democracies, Somalia has a real chance to rebuild.

Got innovative ideas about how the world can help Somalia rebuild? Share them in the comments.

Read more: Africa Review interviews the leader of a Somali clan militia that's been fighting al-Shabaab alongside the African Union forces.

Sources: Avaaz, Guardian, BBC, Financial Times, Hurriyet Daily News, Africa Review