The government has identified the development of the transport and logistics sector as key to job creation and economic diversification. The authorities have enacted several reforms to encourage private investment in Djibouti’s transport infrastructure and related industries in line with Djibouti Vision 2035, a long- term development plan aimed at transitioning the country into a middle-income economy.
Country-wide reforms aimed at streamlining administrative processes, offering tax breaks and other economic incentives to investors, and minimising restrictions on foreign labour have made it easier for foreign companies to enter the market. As such, several international companies have invested in large-scale transport projects in recent years, supporting Djibouti’s aim to transform itself into a commercial trading leader for the broader region.
Investment
There are seven ports located along Djibouti’s coastline. Its most well-known terminal, the Port of Djibouti in the capital Djibouti City, has recently evolved into a trans-shipment facility. It handles maritime trade for Djibouti and facilitates imports and exports for landlocked countries across East Africa, including neighbouring Ethiopia.
Situated on the Horn of Africa at the entrance of the Red Sea on the Bab Al Mandab Strait, Djibouti is already a strategic centre for global trade. Approximately 30% of all merchant shipping passes through its waters each year. The Port of Djibouti was ranked first in sub-Saharan Africa and placed 19th globally out of 370 container ports surveyed in the World Bank’s Container Port Performance Index in 2021.
There is significant potential to modernise and expand the port further to attract greater foreign investment flows. In early 2022 the government proposed an urban renovation project for the old port designed to boost infrastructure investment and improve Djibouti’s attractiveness as an international business destination. The project is being co-financed by China Merchants Group (CMG) and the Djibouti Ports and Free Zones Authority (DPFZA).
The development of several other transport and logistics projects is also supporting Djibouti’s economic growth and helping it become a regional trans-shipment hub. The multi-phase Djibouti International Free Trade Zone (DIFTZ) and the Djibouti Damerjog Industrial Development free zone were under construction and partially operational as of late 2022. In addition, the development of several new roads, a major electrified rail line and new flight routes is helping Djibouti attract international attention and funding for new infrastructure.
Infrastructure
A major recent trans-shipment project, the $590m Doraleh Multipurpose Port, is supporting Djibouti’s aim of becoming a regional trade centre and promoting economic growth. Operational since 2017 and financed by the Port of Djibouti, it is crucial to efforts to improve trade connectivity between Asia and Africa and boost regional integration. The Doraleh Multipurpose Port is a joint venture between the DPFZA, which owns 76.5%, and CMG (23.5%).
The multipurpose port is connected to the new Addis Ababa–Djibouti Railway, the parallel new highway and the new DIFTZ, which was inaugurated in July 2018. The port was built in the sparsely populated Doraleh area, 12 km west of Djibouti City. It can accommodate ships with an average of 100,000 dead weight tonnage, with several terminals for bulk, break, container and roll-on/ roll-off ships. It has the capacity to discharge 22,100 tonnes in 24 hours at the dry cargo; 200 units per hour at the RoRo Terminal; 40 movements per crane per hour at the container terminal; 12,000 tonnes per day and 100 containers in three hours at the railway terminal; and 7000 tonnes per day per vessel at the break bulk terminal. It spans 1200 metres of quay line, has a depth of 15.3 metres and provides 690 ha of land for industrial activities. The port was developed by two companies, China Civil Engineering Construction Corporation (CCECC) and China Construction Harbour and Channel Engineering Bureau Group Company. The port project complements work by CCECC on the new electrified rail line, which runs from the port to neighbouring Ethiopia, supporting the expansion of the East African trade market.
Due to its strategic location on the new major railway route, five trains stop each day at Doraleh to carry goods and livestock to and from the port to other locations across East Africa. According to the DPFZA, the Société de Gestion du Terminal à Conteneurs de Doraleh currently has a throughput capacity of 1.6m twenty-foot equivalent units. Per recent UN statistics, Djibouti is one of only two African countries where the median amount of time that ships spent in port in 2021 was around one day, making the country more efficient than many other ports around the world.
Livestock Terminals
As part of the Doraleh Multipurpose Port project, the authorities worked in partnership with the government of Ethiopia to develop a $400,000 livestock terminal, which officially opened in 2021. The annual animal capacity of the facility amounts to 2.5m heads, and a quarantine and resting area is provided for animals at the terminal before they are loaded onto ships. The new facility allows Ethiopia to export live animals using the appropriate quarantine and inspection services.
Ethiopia’s agriculture sector contributes around 40% to the country’s GDP, and approximately 75% of the national workforce is employed in agricultural activities. According to US-based data-management platform Knoema, Ethiopia has the biggest livestock population on the African continent, with an estimated 70m cattle, 42m sheep, 52m goats, 8m camels and 56m chickens in total. Under the Ministry of Agriculture’s Ten-Year Strategic Development Plan, the preservation of Ethiopia’s livestock has been prioritised in order to ensure food security and decrease the country’s reliance on agricultural imports, which totalled $3.4bn in 2021.
The new livestock terminal at the Doraleh Multipurpose Port is expected to help boost livestock numbers in Ethiopia by creating a better market structure with enhanced access to suitable transport and well-established routes. Further, the development of the terminal is expected to deepen Ethio-Djibouti relations. The two governments have already worked together on major infrastructure projects in recent years, such as the Addis Ababa–Djibouti Railway and highway. These projects are expected to support economic growth across the two countries.
In addition to the new terminal, the $70m Damerjog livestock port in the Djibouti Damerjog Industrial Development zone on the Somali border was launched in 2017. Funded by the Great Horn Investment Holding, it earns $500m in revenue a year. The terminal is 700m long and has five livestock carriers. It is also equipped with a 5-ha transit area to keep cattle and a 50-ha animal collection area, with a 155,000-head capacity.
Benefits
In recent years, significant foreign direct investment in ports, rail and roads has helped lay the groundwork for establishing Djibouti as a major trans-shipment hub. The ongoing expansion of several of Djibouti’s ports will likely attract greater private investment in the transport sector, supporting the government’s aim for economic diversification and job creation. As Djibouti develops its country-wide trade and transport infrastructure, it is also building stronger relations with countries in the region to develop its import and export markets.
The construction of large-scale livestock facilities in partnership with Ethiopia is expected to help boost the trade of animals in the region through enhanced export facilities and transport routes, and help its East African neighbour to ensure greater foreign exchange earning. The development of key transport infrastructure and supporting trade markets will not only boost Djibouti’s economic outlook and expand opportunities but will also support economic growth at the regional level.
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