Viewpoint: Ramiss Houmed
Djibouti has long served as a model of stability among its regional neighbours. However, from a macroeconomic perspective the country is grappling with several challenges. These include the impact of the Covid-19 pandemic, persistent inflation and the ongoing conflict in Ethiopia, which supplies key goods such as vegetables, drinking water and electricity; and accounts for 80% of Djibouti’s exports through its ports. To realise Djibouti’s ambition of becoming a regional logistics, economic and financial centre, it is important for the country to undertake several reforms.
The first opportunity to do so is to create an attractive business environment for regional and international investors, particularly in terms of Customs, trade and tax matters. The government can look to the various ministries focused on investment and the experience of the Djibouti Chamber of Commerce to achieve these objectives, while strengthening governance. Moreover, special attention should be paid to the implementation of internal controls, particularly regarding accountability and budget discipline.
In tandem, the Djibouti Sovereign Fund will contribute to economic diversification, sustainable and inclusive social and economic development, and prosperity. In the short and medium term, the sovereign wealth fund prioritises investment in the country. In the long term, it will focus on projects aimed at strengthening regional integration before diversifying its assets internationally, a strategy adopted by other such funds.
Furthermore, it will be important for Djibouti to adopt a tax system that attracts projects with sustainable growth models. The improved provisions would include the elimination of activity patents, import patents and the obligation to affix stamps to invoices or proforma. Lastly, modernising the tax administration through the implementation of an efficient information system and transitioning to e-taxation for declarations and tax payments could augment the country’s potential as a destination for investment and high-value add projects.
Against the backdrop of revitalising the private sector, it will be necessary to address the twin hurdles of growth and employment by aligning job seekers’ training and skills to opportunities, and reducing the cost of employment. The numerous economic and free zones, as well as ports, have an ongoing need for skilled labour and many qualifications require a broad process of upstream training. Moreover, the growth of the banking sector, start-ups and the demand for skilled professionals such as notaries, doctors, consultants and accountants will require bilingualism and versatility.
This outlook calls for improvements to the higher education and vocational training systems, as well as existing learning tools. To lower the unemployment curve, enhancing the employability of job seekers should be combined with a reduction in the cost of employment. This can be achieved by introducing variable rates depending on the payroll, along with one-off exemptions for first-time hires.
Amid the rise of tech, Djibouti created the Ministry of Digital Economy and Innovation. The development of the ICT sector is crucial for the country, which intends to leverage its strategic location to position itself as a regional nexus of the digital economy.
The country possesses a comparative advantage in terms of infrastructure and know-how, and continuously evaluates its performance on key digital metrics vis-à-vis its regional neighbours. Numerous partnerships and agreements have already been executed, particularly in terms of the free movement of goods and people, as well as measures to enable the implementation of tax treaties and non-taxation mechanisms.
Strengthening regional integration will require the expertise of professional services firms. This is underscored by the presence of our audit and advisory branch in Somalia and Somaliland, enabling service delivery to Djiboutian and other clients across the region and deepening the pool of support companies operating in emerging economies with high growth potential.
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