Historically, industrial development has been the backbone of sustained economic growth and development. The transition from subsistence farming to formal manufacturing labour has consistently underpinned gains in jobs, wages, government revenue and infrastructure development in low-, middle- and high-income nations. The Covid-19 pandemic-induced economic fallout underscored the imperative of inclusive and sustainable industrialisation, as enshrined in the 2030 Agenda for Sustainable Development that the UN launched in 2015. With global supply chains, trade, labour markets and foreign direct investment (FDI) in flux, as well as growing concerns about climate change, a robust manufacturing sector will play a critical role in fostering economic recovery and resilience.

Nestled at the crossroads of Africa, the Middle East and the Indian Ocean, Djibouti’s geostrategic location undergirds its stated ambition to become the Dubai of Africa – a regional nucleus for transport, logistics, manufacturing and telecommunications services. While the industrial sector is not as well known as its transport and logistics counterpart, the government, guided by Djibouti Vision 2035, the country’s long-term economic and diversification development strategy, is committed to leveraging its maritime strengths to unlock its industrial potential and achieve middle-income-nation status.

Structure & Oversight

Djibouti Vision 2035 is divided into five-year plans. In February 2022 Djibouti launched its second five-year plan for the period 2020-24 – Djibouti ICI – revolving around three strategic axes: inclusion, connectivity and institutions. The connectivity axis outlines the government’s ambition to consolidate and expand its position as a transport and logistics nucleus to become a regional and continental centre for financial, e-commerce, and information and communications services. Going forwards, a key priority is to develop the country’s nascent manufacturing base. One of the government’s primary levers for industrial growth is its objective of attracting light-manufacturing industries from countries with rising labour costs to its free zones, such as assembly lines for vehicles and consumer goods. While no major manufacturing clusters exist, the Ali Sabieh region, for example, has been earmarked as a potential site for industrial development, and the local building materials market is a strategic focus for industrial promotion.

The Ministry of Economy and Finance, in Charge of Industry (Ministère de l’Economie et des Finances, Chargé de l’Industrie, MEFI) designs and implements policies pertaining to industrial development, regional competitiveness and economic integration. The responsibility for developing and approving standards and monitoring compliance with technical regulations lies with MEFI, which was established in 2012. The Djiboutian Industrial and Commercial Property Office enforces industrial property rights through the administration of a national trade registry, and provides investors with a digital platform for prompt business incorporation.

Performance & Size

While the export of raw materials, such as coffee and cocoa beans, and the import of processed goods and finished products fuel most economies in Africa, Djibouti’s services sector continues to dominate economic output. The predominance of the tertiary sector is a by-product of the country’s sophisticated port and logistics industry. This infrastructure has led to the development of shipping and freight services that facilitate 95% of inbound and outbound trade from Ethiopia. The primary sector, for its part, is characterised by extensive livestock farming, artisanal fishing, and market gardening in oases and nearby towns.

The value added to GDP by industry, including construction, grew from 14.6% in 2019 to 14.9% in 2020. However, the World Bank expected industrial contribution to GDP would decline from 1.4% in 2021 to 1.3% in 2022. In terms of employment, 13.4% of the 414,572 in the active labour force worked in industry in 2019, compared with 62% and 24.5% for the services and agriculture sectors, respectively. In 2018, 23 companies operated in the industrial sector, of which 14 were national companies and nine foreign. Foreign enterprises accounted for 493 of the 892 jobs created in the sector in 2018, while local firms generated 399 new employment opportunities.


Djibouti’s manufacturing base is at a relatively early stage of growth, with the critical segment posting flat but consistent results across key metrics in recent years. The manufacturing value added (MVA) growth rate, which is a key measure of industrialisation, hovered around 3-4% between 2017 and 2021. In 2019 and 2020 MVA as a percentage of GDP held steady at 4%, and dipped slightly to 3% in 2021. In terms of output, manufacturing contributed $140m to GDP in 2020, compared to $110m in 2019, representing a 23.2% increase.

In 2018 razor blades, railway/locomotive and machinery parts comprised three of the country’s four-largest manufacturing exports, pointing to a potentially lucrative niche of basic metal product manufacturing. However, the high cost of inputs and utilities makes reaching meaningful scale difficult, especially as many production plants are still highly dependent on intermittent hydropower supply from Ethiopia which does not always satisfy demand.

Increasing the size and capabilities of the labour force to bridge the gap between qualifications and skills will be an important prerequisite for expanding manufacturing capacity. Djibouti’s labour productivity, in terms of GDP per hour worked, stood at $7.60 in 2021 – the second highest in the region behind South Sudan – which represented an increase of 3.1% from 2020. The country benefits from relatively low labour costs; however, further human capital development is seen as a key enabler of large-scale, labour-intensive and high-skilled manufacturing activities.

With the strengthening of the education system, increasing support for vocational development from the Ministry of National Education and Professional Training, and funding from myriad international organisations such as the World Bank, Djibouti can expect to see steady improvements in its labour productivity (see Health & Education chapter). Moreover, Djibouti ICI’s emphasis on improving digital literacy and the increasing digitalisation of local business operations could foster the development of higher-level technical skills and attract foreign manufacturers to its free trade zones (FTZs). Lastly, the manufacturing sector stands to benefit from an array of incentives underpinning improvements to the business climate, investment promotion and private sector development.

A chief example of policy reform is the Djibouti Investment Code, introduced in November 2022 with the support of the EU. It exempts certain companies from internal consumption and import taxes for the importation of raw materials used in manufacturing. The government’s aim is to create a legal framework that strengthens investment security and improves the business environment, as well as institutions responsible for investment. Similar policy measures and implementation could be beneficial in terms of unlocking the catalytic effect of infrastructure investment on manufacturing.

With tertiary sector activity generating more than 75% of GDP, the growth of Djibouti’s manufacturing capacity will depend, in the short to medium term, on sustained investment in port facilities and FTZs. Long-term growth will be driven by the success of the economic diversification agenda outlined in Djibouti Vision 2035 and recapitulated in Djibouti ICI.

Building Materials

The local building materials market has grown steadily on the back of investment in roads, rail, ports and airports. In recent years domestic production has been costly due to the high price of construction inputs such as energy, leading to a reliance on imports. “Cement and steel, two of the most widely used building materials, are expensive and subject to high import duties,” Habon Abdillahi, COO of Habone Construction, a local engineering firm, told OBG. Amid cost pressures, the government has intensified its efforts to reduce importation of building materials by encouraging investment in national cement production.

The national cement company, Cimenterie d’Ali-Sabieh (CDS), and UAE-based Nael Cement Products continue to dominate the supply of local cement. With its output of 500 tonnes per day, CDS has helped to reduce the country’s dependence on imported cement and foreign expertise in the production process. Indeed, in May 2022 Ilyas Moussa Dawaleh, the minister of economy and finance, stated that cement production is now 100% localised through the extraction of previously imported clinker, the basic constituent of cement, from Mount Arrey – lowering the price of a tonne of cement from DJF30,000 ($170) to DJF23,000 ($130). This development raises the prospect of boosting not only the construction of more affordable homes, but also export earnings from manufacturing – a key indicator of industrial development.

Value-Added Production

Supported by three fishing terminals, the fisheries sector had an approximate yield of 2323 tonnes in 2020, up from 2272 in 2019. Exploitable fishing potential, however, is estimated to be more than 40,000 tonnes, of which 9300 tonnes consist of marine species with high added value such as tuna, king mackerel and sardines. The private sector will be key to nurturing value-added production (VAP) in the nascent blue economy. One example is the 2018 concession of the Djibouti Fish Port awarded to local construction company Al Aoul Group, resulting in a $10m upgrade of the port’s infrastructure. Equipped with updated facilities including an ice production unit, the rebranded Djibouti Port de Pêche & Marina Services plans to establish an industrial unit specialising in the processing and export of fresh and frozen fish products to increase fish exports in the Horn of Africa.

Under the Made in Djibouti brand, Djibah Seafood is the country’s first seafood packaging and processing plant and exports products to Europe, the US, the UAE and Saudi Arabia. With its facilities located near the Djibouti Damerjog Industrial Development (DDID), Djibah Seafood plans to expand into the Ethiopian market following a memorandum of understanding signed in August 2022 with Addis Ababa-based supermarket Lewis Retails, which is owned by Ethiopian conglomerate Belayab Group. Strengthening the enabling environment for the private sector by ensuring market access will be critical to realising the VAP of the fisheries industry.

Palm Oil

The palm oil industry, while still developing, has played a pioneering role in stimulating industrial activity in Djibouti. Encompassing an area of 12 ha and employing more than 500 workers, Golden Africa’s palm oil processing and packaging plant was the largest factory in Djibouti and the largest palm oil refinery in the Horn of Africa in 2019, following a $30m investment campaign in 2018. In 2020 palm oil imports and exports were valued at $232m and $45m, respectively. This made palm oil the second-most – exported product in Djibouti that year, with Ethiopia accounting for 100% of exports. A subsidiary of Malaysian trader Pacific Inter-Link, as well as the branch of one of South-east Asia’s largest palm oil refiners and producers, Golden Africa is leveraging strategic investments and Djibouti’s competitive advantages to position the nation as a regional processing and packaging centre.

In 2019 Golden Africa invested $5m in new machinery to increase production from approximately 8000-9000 tonnes of palm oil per month to 13,500 tonnes. The medium-term target, however, is to generate 21,000 tonnes of palm oil to bolster its 20% share of the Ethiopian palm oil market, which had a demand of 50,000 tonnes per month in 2019.

Given growing demand from Ethiopia’s population of more than 120m, and the 6000 and 8000 tonnes per month required by Somalia and Eritrea, respectively, Djibouti’s port and logistics facilities make it a strategic location for a regional refinery centre. Golden Africa’s refinery is situated near the Doraleh Multipurpose Port, where palm oil-laden vessels from Malaysia and Indonesia dock; subsequently, the oilseeds are directly transported to the company’s processing units via a 3.4-km pipeline.

Ethiopia’s plan to spend $1.5bn on edible oil imports in 2022-23, the majority of which will be palm oil, to meet the country’s annual requirement of 900m litres underscores the potential of Djibouti’s palm oil-processing segment. Indeed, in January 2023 Ethiopia had already procured 43.4m litres of oil worth some $70m to fulfil demand in the market. The utility of palm oil as an industrial input for plants, such as prospective tenants in Djibouti’s industrial park, and Golden Africa’s ambition to diversify plant activities into soap manufacturing and other derivative products bodes well for industrial development.


The DDID, which plans to house several heavy industry tenants, exemplifies the ongoing industrial development drive. In 2020 East Africa’s first industrial complex with a road-port-air-railway network attracted $2.5bn in FDI to finance the construction of a floating refinery, steel plant, wire mesh factory, glass factory and PVC pipe factory. The Chinese-funded works will form the manufacturing backbone of Djibouti’s only heavy and petrochemical industrial base, generating thousands of jobs. DDID will also feature a 2.3-MW power plant, a ship repair yard, the landing point of a 767-km gas pipeline from Ethiopia and a 300,000-cu-metre oil depot. The phased project, which commenced in 2018, will supply construction materials and petrochemicals for the local and East Africa markets.

To support these initiatives, the country is making significant investment in renewable energy resources; namely, the $160m Ghoubet wind power plant, the $40m Gran Bara solar farm, the $150m Damerjog biomass plant, and the Gala’le Kôma, Fiale and Hanle-Garrabayis geothermal projects (see Energy & Utilities chapter). These clean energy initiatives have a combined capacity of more than 700 MW and, coupled with DDID’s petrochemical storage and refining facilities, could help overcome the main hurdle to sustainable industrial growth: the cost and availability of reliable energy. Ultimately, the DDID, in conjunction with the Djibouti International Free Trade Zone (DIFTZ), will facilitate the transition from an import- and re-export-dependent economy to a manufacturing- and processing-led export economy.

Free zones & Incentives

Along with the DDID, the Djibouti Free Zone (DFZ) and the DIFTZ comprise the country’s three FTZs. The FTZs aim to provide the requisite infrastructure and business environment to attract global industrial players across the logistics, marine, construction, automotive and home electrical segments by offering intermodal transport and logistics networks, and handling regional and international trade (see analysis).

The evolution of the country’s role as a conduit for Chinese manufacturing and processing investment in landlocked Ethiopia is considered essential to its industrial growth. With the creation of industrial clusters focused on strategic segments such as manufacturing, Djibouti’s FTZs will accelerate the nation’s transformation into a regional and global manufacturing and processing centre.

The FTZs offer numerous incentives guaranteed by the Djibouti Ports and Free Zones Authority. These include tax and Customs exemptions, competitive water and electricity tariffs, and an export mandate of at least 80% of production. Another competitive advantage of the FTZs is their integration with and proximity to key infrastructure such as the Port of Djibouti and the transnational Addis Ababa-Djibouti railway, stretching 752 km from the port to Ethiopia. This network could help overcome infrastructure challenges in the wider economy, potentially lowering manufacturing costs (see analysis).

Supply Chain & Inputs

Given a population of just over 1m people, Djibouti’s supply chains are largely geared towards facilitating trade with Ethiopia and other East African nations. In August 2023 International Djibouti Industrial Park Operation partnered with Ethiopian Airlines and Air Djibouti to develop sea-air operations between China and Africa, combining the speed and efficiency of air freight with the cost savings of sea freight operations.

Djibouti’s FTZs and their integration into the wider port and logistics network will be central to strengthening supply chain resilience for industrial growth. However, supply chain linkages between local firms and businesses in the FTZs remain underdeveloped as the latter import raw materials and intermediate products from overseas, limiting productivity gains for small firms. Catalysing domestic production and ensuring market access will be key to increasing the flow of inputs such as clinker, frozen fish, and untapped minerals like copper and gold to the growing manufacturing base in the FTZs.


The expansion of the industrial sector will be predicated on the sustainable development of FTZs. Moreover, the development of various transport, logistics and renewable energy projects is expected to accelerate the emergence of a manufacturing base supported by facilities that meet international standards within the FTZs. Support measures, such as incentives in the investment code and preferential credit granted to local companies, can help foster the enabling policy environment to attract industrial players. Lastly, investment in vocational training and digitalisation can enhance the competitiveness of Djibouti’s labour force, leading to increased economic growth and helping the country transform into a fully industrialised economy.