Djibouti: Best things come in small packages

COMESA 2018 Special Report, By Kanchi Batra

COMESA 2018 Special Report

Djibouti acknowledges the crucial need for foreign investment to encourage economic development. The country’s assets include a strategic geographic location, tax incentives favourable to business, Free Zones, an open trade regime, and a stable currency. The government of Djibouti has recognised a number of priority sectors for investment, transport/shipping, services (logistics and port-related), energy, tourism, and fishing.

Djibouti may be one of the tiniest and the youngest states in Africa, but it might also be the most talented in business development and investments. While its larger, more influential neighbours are involved in a never-ending border quarrel, Djibouti stands out as a haven of solidity and neutrality. The country is strategically situated at the mouth of the Red Sea, along the shipping route between the Mediterranean and the Indian Ocean.

Djibouti has an established status as a trading hub and a gateway to trillion-dollar markets. Djibouti is preferably centered to simplify trade flows between Europe, Africa, and the Middle East. Expectedly, the logistics industry plays a significant part in its economy, with free zones key among these.

Djibouti’s economic outlook is also favourable; most assessments expect growth to continue at unparalleled rates. The government has been trying in recent years to reduce the structural obstacles to adequate electricity and water supply that handicap growth of the private sector.

Djibouti has pursued a moderate foreign policy. Djibouti’s population is estimated at more than 890,000. French and Somali are the main languages used in government, business and daily activities. English is becoming more widely spoken due to increased American presence and more English-speaking foreign investors.

Economy & Trade

Djibouti has been trying to make the most of its strategic situation and wants to make its port the biggest trans-shipment hub for the Common Market for Eastern and Southern Africa (COMESA) – a trade bloc grouping of around 20 countries. Djibouti is trying to transmute itself into a regional trade, finance, and telecommunications hub. Djibouti hosts France's largest military base in Africa as well as a major US base. Its port is used by foreign navies guarding busy shipping lanes off the coast of Somalia to fight piracy. For Africa in general and the region in particular, Djibouti is an important free trade zone.

Djibouti’s macroeconomic environment has enriched significantly over the last few years.

Djibouti’s main economic activities are focused on the Port of Djibouti, the banking sector, the airport, and the operation of the Addis Ababa-Djibouti railroad, in addition to a small tourist industry. Its strategic location on a busy shipping route is considered one of its most important economic asset. The service sector accounted for nearly 80 percent of the country’s GDP in 2010 (including commerce and trade ‘trans-shipping’), while industry accounted for less than 20 percent of the GDP.

Djibouti provides services as both a transit port for the region and an international transshipment and refuelling centre. Imports and exports from landlocked neighbour Ethiopia represent 70 percent of port activity at Djibouti's container terminal. Augmented investment, particularly in construction and port operations, has led to relatively high economic growth in 2010. With regard to manufacturing, Djibouti’s main industrial activities include a mineral bottling plant, leather tanning, construction, a pharmaceuticals factory, abattoirs, salt mining, and one petroleum refinery. n

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