The Report: Djibouti 2016

A small but important country, Djibouti benefits from its highly strategic location. With access to the Gulf of Aden and the Indian Ocean beyond, the country is a significant gateway to the Horn of Africa and the wider region of East Africa.

Country Profile

In 2014 Djibouti’s economy achieved a growth rate of nearly 6%, according to estimates from the African Development Bank. While unemployment remains a challenge, this growth figure, coupled with a young and expanding population, points to the strong potential of the country. Ports, logistics and associated services remain the dominant economic activity, accounting for more than 90% of GDP, though Djibouti also has some natural advantages. In terms of metals and minerals, the country is home gold, granite, limestone and marble deposits. Djibouti is also looking to leverage its significant geothermal resources to satisfy domestic energy demand. According to World Bank estimates, the country’s population reached 876,200 in 2014 – the majority of which, more than 500,000 people, live in the capital, Djibouti City. Djibouti is also a young country, with more than half of the population under the age of 25. The two official languages are French and Arabic; however, with the ethnic composition of the country consisting mostly of Somalis (60%) and Afars (35%), these groups’ languages are also widely spoken. Djibouti is a relatively young country in political terms. It achieved independence less than 40 years ago and has had just two presidents in that time. Djibouti’s comparative stability in an otherwise volatile region has allowed the country to develop relatively quickly. This chapter contains interviews with President Ismaïl Omar Guelleh; and Carlos Lopes, Executive Secretary, UN Economic Commission for Africa; and viewpoints from John Kerry, US Secretary of State; and Mahamoud Ali Youssouf, Minister of Foreign Affairs.

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Located along a strategic international trade route connecting Africa, the Middle East, Europe and Asia, Djibouti’s economic development has been linked with rising global commerce. In order to fully harness its geographic advantages and maintain its competitiveness, the country is now focusing on infrastructure improvements and a gradual diversification of its economy. While growth rates over recent years attest to the fact that the country’s position as a center for international commerce can be leveraged successfully, maintaining this level of economic development will depend on how its infrastructure programme is implemented. The ongoing expansion of transport networks and facilities will need to be coupled with careful management of Djibouti’s fiscal position. This chapter contains interviews with Ilyas Moussa Dawaleh, Minister of Economy and Finance; Mahdi Darrar Obsieh, Director, Djiboutian Investment Promotion Agency; and Youssef Dawaleh, President, Chamber of Commerce of Djibouti; and a dialogue between Hikmat Daoud, Chairman, National Confederation of Djiboutian Employers; and Djama Aouled, Chairman, Federation of Djiboutian Corporations.

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On the back of a rise in both capital investment and transport activity, Djibouti’s banking sector has seen considerable expansion in recent years. The most visible change has been the growing number of players in the market, which has led to an increase in competitiveness, and the expansion of products and services targeting local clients. The increasingly robust regulatory role being adopted by the Central Bank of Djibouti has led to the promulgation of various new rules – ranging from risk assessment frameworks and sharia compliance to regulations for new payment systems. This should help pave the way for increased retail and corporate activity. Although some vulnerabilities persist, the range of measures currently on the sector’s reform agenda is set to further modernise the financial industry. Better payment systems and improved credit guarantees will not only help the banking sector, but will have a broader positive impact on Djibouti’s economy.

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Transport & Logistics

Thanks to Djibouti’s fortuitous positioning between East Africa and the Middle East, on a key trade route between Asia and Europe, the country has long played a central role in regional trading. This has translated into a dynamic transport sector and significant GDP growth rates since the mid-2000s. In order to take its geographic advantages to the next level; however, Djibouti will need to ensure that large-scale investments to upgrade its transportation networks are implemented adequately. The opening of a new railway and road links to the north of Ethiopia will contribute to exchanges with other landlocked countries in East Africa, as well as new ports and facilities that will bring added capacity to freight handling. Although large-scale investment in port infrastructure will be critical, coordination between the building of new maritime commerce infrastructure, and the rest of the inland road and railway networks will be essential for the Djiboutian transport and logistics sector to function properly as an integrated system. This chapter contains interviews with Moussa Ahmed Hassan, Minister of Equipment and Transport; Aboubaker Omar Hadi, Chairman, Djibouti Ports and Free Zones Authority; and Mario Fulgoni, CEO, Air Djibouti.

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Although Djibouti benefits from an array of renewable resources, the country was a net energy importer as of early 2016 and has set itself some ambitious goals to improve domestic supplies. The energy sector is a key element of the country’s long-term development plan, known as Djibouti Vision 2035, which identifies energy access and security for its 875,000-strong population as strategic goals, as well as central to expanding manufacturing and industrial activities. The plan sets forth the ambitious target of meeting 100% of Djibouti’s energy demand through renewable sources by 2020. While keeping pace with growing energy needs will remain a key challenge in the years ahead, several factors are likely to prompt a significant redefining of Djibouti’s energy sector over the long term. With considerable renewable energy resources for the size of its economy, there is real potential for Djibouti to reach its goal of self-sufficiency, reducing energy costs for businesses and benefitting the economy as a whole. This chapter contains interviews with Gregory Meneses, Managing Director, Black Rhino; and Houssein Ahmed Houssein, General Manager, Horizon Djibouti Terminals Limited.

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Industry & Retail

Given Djibouti’s economic reliance on international trade, manufacturing industries have traditionally played a secondary role in the country’s economic development. However, authorities are now looking to drive their expansion as a means to cut unemployment, and foster more sustained and inclusive economic growth. As the gateway to East Africa, Djibouti is well positioned to supply manufactured goods to the surrounding landlocked countries. By encouraging FDI in its free zones, Djibouti has an opportunity to boost manufacturing activities. Meanwhile, there is strong potential for growth in other subsectors, particularly cement and building materials, bolstered by the country’s ongoing infrastructure investments. With fisheries and salt mining pegged to see greater investment due to rising local demand and efforts to strengthen the business climate, there is definite scope for industry to play a larger role in the economy. This chapter contains interviews with Ahmed Osman Guelleh, CEO, GSK Group; and Abdoulkarim Al Gamil, Chairman, Al-Gamil Group.

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Telecoms & IT

Djibouti has witnessed a steady expansion in opportunities for telecommunications investment, mostly due to increasing consumption and regional demand for high-bandwidth international connectivity. Over the past two years more than $100m has been invested in gateway connections, with the country now linked to six submarine data cables. These capital expenditures are in line with government efforts to strengthen the role of telecommunications and IT in national development, and to increase the role the sector plays regionally. Given the rapid development of Djibouti’s IT sector, the country possesses significant potential in terms of data provision for the wider region. Challenges nonetheless remain in terms of ensuring the affordability of tariffs and in building a competitive market for the future. This chapter contains an interview with Mohamed Assoweh Bouh, Director-General, Djibouti Telecom.

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Construction & Real Estate

Benefiting from several years of consistent macroeconomic stability and the roll out of more business-friendly regulation, Djibouti has attracted a rising amount of investment – equivalent to as much as 52% of GDP – with the vast majority directed towards capital projects. This in turn is having a noticeable impact on Djibouti’s construction sector. Urban renovation programs in the cities, especially the capital, are improving housing infrastructure, while large-scale transport infrastructure projects aiming to better connect the country and establish its position as an international commerce hub are helping reshape this small nation in the Horn of Africa. New transport, energy, water and urban infrastructure will be key for Djibouti to solidify its economic integration with international markets, but equally important will be its impact on the overall improvement in living conditions. Making the housing construction sector more dynamic will significantly help in this respect, though tackling the country’s housing deficit will remain a critical challenge, both in terms of quality and quantity. The government is working to devote a higher amount of public resources and attention to the development of adequate housing solutions. In addition to helping expand housing options for the 875,000-person country’s middle-class, large-scale efforts are also being directed towards the elimination of informal settlements in major cities, with a view to replacing temporary housing with adequate long-term construction. Policy changes – both in terms of the allocation of budgetary resources, as well as stronger encouragement for private sector participation – are expected to accelerate the construction of new homes across the country over the coming years. This chapter contains an interview with Amina Abdi Aden, Secretary of State for Housing.

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Djibouti’s tourism sector has set some ambitious goals, including an aim of attracting 500,000 visitors by 2030. The industry is slated to play a key role in the government’s economic development strategy, Djibouti Vision 2035, which looks to leverage the role of tourism as a job creator and foreign exchange earner, in line with broader economic diversification efforts. Djibouti benefits from a variety of niche attractions, including sandy beaches along the Red Sea, salt lakes, volcanic fields and popular underwater diving sites. Yet, according to the World Bank’s “Country Partnership Strategy for the Republic of Djibouti” report, published in March 2014, only 10% of the country’s tourism potential is being exploited. Concerns over infrastructure shortfalls remain, and further capacity development is required, as limited connectivity is an impediment to tourism growth. This chapter contains an interview with Bertrand Lafrance, Founder, Discover and Aid Nature Wildlife Reserve.

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In conjunction with JC Colas-Groupe CHD, OBG explores the taxation system, examining Djibouti’s investor-friendly environment. This chapter contains a viewpoint from Felix Emok N’Dolo, Managing Director, JC Colas-Groupe CHD.

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Legal Framework

OBG introduces the reader to the different aspects of the legal system in Djibouti, in partnership with Cabinet Guerinot.

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The Guide

The guide includes information on hotels, government offices and other services, alongside useful tips for visitors on topics like currency, visas, language, communications, dress, business hours and electricity.

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Table of Contents