The Report: Djibouti 2018

Located at a juncture between Africa, the Middle East and Asia, Djibouti has easy access to international trade routes via the Gulf of Aden and the Red Sea, and borders fast-growing yet landlocked Ethiopia, making it an ideal continental hub. New ports, railway links and road improvement projects are enhancing economic efficiencies and providing a solid platform to bolster expansion in sectors.

Country Profile

An important entryway to the Horn of Africa, Djibouti’s strategic location at the confluence of the Red Sea and the Indian Ocean, combined with its historic links to Europe, the Arabian Peninsula, East Africa and Asia, make it a unique crossroads for international culture and trade. Having long enjoyed relative security and stability – avoiding many of the conflicts that have beset its neighbours – the country has gained a valuable reputation as a safe haven. Today, it stands as a key focus for world and regional powers alike, making it a natural investment destination and a growing centre of global trade. This chapter contains interviews with President Ismaïl Omar Guelleh; Justin Yifu Lin, Director, Institute of New Structural Economics, Peking University; and Ali Guelleh Aboubaker, Minister of Investment; and viewpoints with Tibor Nagy, Assistant Secretary, Bureau of African Affairs, US Department of State; and with Christine Lagarde, Managing Director, IMF.

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Building on consecutive years of robust headline growth, Djibouti has been able to leverage its geographic position to specialise in transport and logistics operations. This has brought integration with global commerce routes and an increase in infrastructure investment. However, to create a more reliable mechanism for poverty reduction and job creation, further improvements to the operating environment are needed. Nevertheless, the country is well placed for continued growth over the coming years, which could be aided by a better interconnection between the domestic business sector and the foreign investments reshaping Djibouti’s transport infrastructure network. This chapter contains interviews with Ilyas Moussa Dawaleh, Minister of Economy and Finance; Mohamed Aramis, Minister of Decentralisation; and Ouloufa Ismail Abdo, Director, Djibouti Office of Industrial and Commercial Property.

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Financial Services

Djibouti’s economic growth, based to a large degree on capital investment in infrastructure development and logistics, has been underscoring the expansion of its banking system. Since liberalisation of the sector in 2006, a number of new financial institutions have set up shop in the country, hoping to take advantage of its growing role as a regional transport and financial hub. With a population of approximately 900,000 inhabitants as of mid-2018, the country’s domestic financial services market remains small. However, the low level of banking penetration can also be seen as an opportunity for growth, both in terms of new customer acquisition and product sophistication. This chapter contains interviews with Ahmed Osman Ali, Governor, Central Bank of Djibouti; and with Nadhir Zouaghi, President, Professional Association of Credit Institutions.

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Transport & Logistics

Situated on the Horn of Africa at the entrance of the Red Sea on the strait of Bab el Mandeb and overlooking routes linking Europe, Africa, the Middle East and Asia, Djibouti aims to further leverage its unique location among important routes of commerce to become an international trade hub. The country is investing in new transport infrastructure, developing ports and airports, extending road networks and easing cargo traffic with neighbouring Ethiopia through a railway connection inaugurated in January 2018. At the same time, increasingly modern facilities are removing bottlenecks and improving Djibouti’s position as a gateway for other landlocked countries in the region. However, maintaining momentum and, more broadly speaking, the economy’s positive performance will also require the diversification of economic partners. This chapter contains an interview with Aboubaker Omar Hadi, Chairman, Djibouti Ports and Free Zones Authority.

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After being dependent on energy imports to balance its insufficient domestic generation for a long time, Djibouti is now looking to completely transition its electricity production towards domestic renewable energy. Geothermal, wind and solar projects are being implemented, with the goal of reaching 100% renewable energy generation by 2020. Not only would this help diversify the economy by developing a new industry, it will also support the creation of related ones, such as domestic light manufacturing, by providing low-cost energy. However, improvements in energy generation and distribution also need to be framed through the benefits they can bring to domestic businesses. High electricity costs remain one of the barriers most frequently cited by private sector operators, and one that could be addressed through more efficient generation and distribution methods. This chapter contains an interview with Yonis Ali Guedi, Minister of Energy and Natural Resources.

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Industry & Retail

Economic activity in the country is dominated by the tertiary sector – representing roughly 80% of GDP – while the primary sector remains underdeveloped due to an unfavourable natural climate and geography. However, while industry accounts for less than one-fifth of GDP, investment in free trade zones and port facilities is expected to lead to more robust growth in the sector in the coming years. Foreign investment, mainly from China, will help expand Djibouti’s redistribution capacity, as will continued partnership with Ethiopia. Over time, these facilities will provide opportunities for increased manufacturing and contribute to economic diversification. As Djibouti’s economy evolves and the number of modern shopping outlets grows, grocers and the distribution channels that supply them have proven to be key drivers of the country’s retail industry. This chapter contains an interview with Youssef Dawaleh, President, Chamber of Commerce of Djibouti.

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Although the ICT sector remains largely dominated by the state-run operator, it has nonetheless received sustained investment in mobile networks, submarine cable connections and infrastructural upgrades. This, combined with government efforts to bolster the role of ICT in development plans, provides multiple investment opportunities in the industry. Challenges surrounding coverage in rural areas and high internet connection costs remain; however, it could benefit Djibouti to create a competitive marketplace for service provision, which in turn would lead to more competitive prices and the achievement of sector’s full potential. This chapter contains an interview Mohamed Assoweh, CEO, Djibouti Telecom.

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Construction & Real Estate

Large investment volumes have been stimulating construction activity, notably in port expansions, road development and the establishment of new power stations. These projects are expected to drive growth in both the sector and the overall economy. In addition, the need to improve living conditions for the country’s population is providing motivation for a range of urban projects. Hence, the authorities have sought to overhaul the country’s real estate sector. Over recent years the lion’s share of investment has flowed into critical infrastructure development. These projects are necessary for the consolidation of the country’s position as an international logistics centre. However, investment in new housing, as well as the upgrade of existing housing stock, is also vital for long-term development. This chapter contains an interview with Amina Abdi Aden, Delegate Minister of Housing.

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With new promotional campaigns and its popular “Djibeauty” slogan, the country has garnered positive attention from international media and received prestigious accolades in recent years. As outlined in the Djibouti Vision 2035 strategy, the government’s national development policy launched in 2014, economic diversification beyond trade will rely heavily on the country’s ability to sustainably develop its tourism offerings. While there has been some success in boosting investment in infrastructure, which is key to facilitating tourism, the country still has a long way to go in terms of improving international connectivity and domestic accessibility for it to become a top tourist destination. This chapter contains an interview Osman Abdi Mohamed, Director-General, National Tourism Office of Djibouti.

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Health & Education

Meeting the health care needs of Djibouti’s citizens in both concentrated urban areas and diffuse rural populations has led to differentiated policies based on region. To achieve the goal of universal coverage, the government has committed to improving health care access in the inner regions, providing care to vulnerable populations and boosting coordination with global partnerships in support of its Vision 2035 development strategy, which is prioritising investment in human capital through education and health care. This will build upon the comprehensive overhaul of the Djiboutian education system in 2000, which helped provide 80% of the population with access to education by 2016. Efforts to close the gap for the remaining 20% continue to be the object of significant outreach projects conducted by the government in tandem with international development organisations. This chapter contains an interview with Moustapha Mohamed Mahamoud, Minister of National Education and Vocational Training.

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In conjunction with HLB Djibouti, this chapter explores the taxation system and Djibouti’s efforts to build an investor-friendly environment. It also contains a viewpoint with Ramiss Houmed, Managing Director and Owner, HLB Djibouti.

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Legal Framework

This chapter introduces the reader to the different aspects of the legal system in Djibouti, in partnership with Cabinet Guérinot. It also contains a viewpoint with Melanie Guérinot, Lawyer and Managing Director, Cabinet Guérinot.

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The Guide

This section includes information on hotels, government offices and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress code, business hours and electricity.

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