Interview

What strategy is Djibouti adopting to diversify its investment portfolio over the long term?

GUELLEH: Our country benefits from a very particular geostrategic situation. We are backed by a hinterland of landlocked countries that runs from Ethiopia to the countries surrounding the African Great Lakes, namely Burundi, the Democratic Republic of Congo, Rwanda, Uganda, Tanzania and Kenya. We are also positioned at the crossroads of one of the most strategic maritime passages with the straits of Bab el Mandeb, through which a significant volume of trade passes between the Asian continent and the rest of the world.

For a long time, Djibouti has not been able, or did not know how, to capitalise on its geostrategic positioning and exploit its commercial potential. This is partly attributable to regional instability, but also to the fact that the country lacked the necessary means to do so. Since the turn of the century, however, things have changed, especially following the government’s strategic decision to establish the country’s first deep-sea port in Doraleh. A number of other positive developments ensued, with the establishment of a container terminal, a petroleum terminal and an experimental free zone.

To better position Djibouti regionally and globally, we have since strived to turn our country into a transport and logistics hub, and this ambition has translated into a multitude of bilateral and multilateral partnerships that have continued to establish themselves over the years. Today, investors are very satisfied with Djibouti’s economic prospects, and the country has witnessed increased numbers of investments pour into a diverse range of sectors such as transport and logistics, geothermal energy, hospitality and the fishing industry.

How can Djibouti ensure the sustainability of these investments moving forward?

GUELLEH: A lot of work has been done to put in place a conducive environment for business in Djibouti. Many reforms have been carried out in recent years to make Djibouti an attractive destination for investors. For instance, the reforms we have made in the banking sector allowed us to put an end to the monopolistic reign of two large banks that shared the market. Today, we have more than 10 banks contributing to the country’s economic development. After the macroeconomic reforms of the 2000s, we continued building on the momentum to improve the business environment. It is within this framework that we set up a one-stop shop for public administration to streamline administrative services for investors and other economic players. These are among some of the reforms that have allowed us to make quantitative and qualitative leaps forward in the World Bank’s 2019 ease of doing business index.

That said, easing regulations must go hand in hand with other key advantages to attract and retain investors. That is why we are putting in place an ambitious training policy to align supply and demand in the labour market, while always having the aim of making our economy more competitive. It is crucial that the regional vision we have set in motion for our economy contributes to human resource development.

What measures should be taken to reduce debt in the medium and long term?

GUELLEH: The current level of indebtedness faced by Djibouti is a constraint for the economy. This is all the more important if the country’s ranking as an investment destination is badly perceived by Western rating agencies. That said, there are countries, notably Western economies, that are grappling with indebtedness which at times even exceeds their GDP.

Looking more closely at Djibouti’s indebtedness, one must first understand the structure of it. Indeed, as many countries do, we borrow from our bilateral and multilateral partners, often at preferential rates and mainly to develop our infrastructure. These developments include projects in a variety of subsectors, notably railways, roads and ports. It is the very quality and competitiveness of such infrastructure projects that drives our economic growth. In some ways, debt was a necessary measure in order to provide our country with the infrastructure that would give credibility to our ambition to become a regional hub, in accordance with our strategic position. Additionally, the infrastructure in place is now generating income and allowing us to pay off our debt. For instance, the loans for Doraleh’s deep-water port were repaid in record time.

This initiative is therefore not used to fill budget deficits, but rather to build the foundation that the country needs for its economic development. That is why investors continue to trust us.

In addition to infrastructure, what are the other priority investment areas for Djibouti?

GUELLEH: With the profile of our economy based primarily on services, infrastructure development was, and continues to be, a necessity for our country. Considering our ambition to become a transport hub for the region, we are working to complement our investments in all components of the air, land and sea transport and logistics chain. That being said, the government does not want the infrastructure and logistics sector to be monopolistic in terms of investments. That’s why we have identified valuable investment opportunities in a variety of high-potential sectors such as fishing, tourism and energy. In 2017 we inaugurated the largest free trade zone in Africa, and following that, we encourage the installation of small processing industries that could benefit from our infrastructure for regional or continental commercial expansion.

What are the main challenges facing Djibouti’s socio-economic development?

GUELLEH: The growth of our economy has been sustained for almost two decades. The forecasts are very optimistic, showing that this growth will stabilise at around 7% for the coming years. However, we recognise that this growth, though it creates jobs, has not yet met expectations. There are many reasons for this and the government is aware of it. To that end, we are putting mechanisms in place to ensure that growth is inclusive, enabling the country to achieve its development objectives, while fighting against precariousness.

Considering these necessities, we decided to focus on two main axes: the diversification of investments and the economic development of our regions. The five regions that make up our country are full of untapped potential. I am specifically thinking of the tourism industry and the fishing industry, but the installation of small processing industries in the main free trade zone remains a priority as well. These industries are labour intensive, providing opportunities for job creation, and the government is considering additional incentives to attract investors into these sectors.

How is the relationship with Ethiopia fundamental to the stability of both countries?

GUELLEH: Relations between Djibouti and Ethiopia are primarily historical, friendly and fraternal. Our two countries have many affinities and are united by very strong links. Moreover, our countries share a geographical position that facilitates, and even privileges, the intensification of commercial relations in relation to neighbouring countries. For this reason, these relationships have strengthened and evolved, as we are convinced on both sides of the benefits that can be drawn from them. For example, major cross-border projects such as the electrical interconnection or the new railroad, which links the capitals, prove that we are in an ongoing trusting relationship.

It is equally important that mixed commissions regularly come together to improve the business environment between both our countries. Other major large-scale projects will further solidify this strategic business partnership. We have started an approach of economic integration and we are very satisfied with it.