Boosting industrial output is a core goal of Djibouti Vision 2035, the country’s governing development blueprint, with a focus on expanding industries with trade potential in COMESA and beyond. Free zones have a key role to play in these development efforts, helping to attract capital with targeted incentives, and allowing participating firms to benefit from the economies of scale that clustered industrial operations offer. Given Djibouti’s geostrategic location as the entry point for trade with more than 400m potential consumers in East Africa, the country is well positioned to capitalise on the global realignment of supply chain strategies under way.

Free zones

The country’s first free zone, the 40-ha Djibouti Free Zone (DFZ) located between the Port of Djibouti and Djibouti-Ambouli International Airport, was inaugurated in October 2004. It focuses on regional logistics, warehousing and trade for the East African market, particularly processing and re-exports. The DFZ allows 100% foreign ownership, as well as the unrestricted repatriation of capital and profit, and exemptions from corporate and income tax.

The Djibouti International Free Trade Zone (DIFTZ), for its part, is more focused on trade outside the region. Totalling 240 ha, the first pilot phase of the zone – which will ultimately span 4800 ha and require $3.5bn in investment through to 2028 – was inaugurated in July 2018. Upon completion, the DIFTZ is expected to be the largest such zone on the continent. Companies operating in the DIFTZ are required to employ 30% local talent within five years and eventually scale up to 70% to ensure the zone contributes to local knowledge transfer and upskilling. Estimates suggest that this could create as many as 300,000 jobs. The DIFTZ is projected to add $200m to GDP during its pilot phase, according to government forecasts, equivalent to roughly 6% of 2021’s GDP, with the extension phase reportedly slated to contribute as much as $2.5bn-4bn by 2035-40.

The Djibouti Damerjog Industrial Development is a 15-year project that began in August 2018 to expand the country’s ports and free zones. Its development plan includes an industrial park, liquefied natural gas and oil storage terminals, a crude oil refinery, power plants, a ship repair area and dry docks.

Trade Potential

Djibouti’s free zones have developed greater strategic relevance following the inauguration of the African Continental Free Trade Agreement (AfCFTA) in May 2019. The AfCFTA, which created a 54-country regional common market with 1.3bn consumers and a combined $3.4trn in GDP, aims to double intra-African trade by 2023, and potentially add another $9.2bn in untapped export opportunities to the continent’s existing $22bn by 2025.

The industrial ambitions of neighbouring markets are also likely to play a decisive role in the development of Djibouti’s free zones in the years ahead. Ethiopia, for example, could look to port-adjacent Djiboutian free zones as an attractive base of operations for its fast-growing textiles industry, which would allow producers to save on transport costs.


Given Djibouti’s location and its logistics capabilities, connectivity is an important enabler of its trade and industrialisation objectives. The country has a well-connected maritime logistics network, with the 22-ha Port of Djibouti Container Terminal offering a capacity of 350,000 containers per annum. A 752-km rail line connects Ethiopia’s capital, Addis Ababa, with the Port of Djibouti, and cut the journey time from seven days by road to 10 hours by rail upon its inauguration in January 2018. As such, the DFZ’s proximity to the Port of Djibouti facilitates both the maritime and railway transfer of goods, primarily for importing and re-exporting though the country has ambitions to develop its export portfolio further (see Economy chapter).

With many countries re-evaluating their strategic supply routes in the post-pandemic context, Djibouti’s development plans for free zones and logistics infrastructure should position the country to capitalise on new opportunities in the realm of global trade.