Djibouti's new ambitions

A small country, stuck in the Horn of AfricaDjibouti, a former French colony that became independent in 1977, appears at first sight to be unqualified as a business destination. Djibouti, a former French colony that became independent in 1977, does not appear at first sight to be very well qualified as a business destination. Backed by the Ethiopia's economic giantWith a population of around 1 million, the region borders the Somali cauldron and, just off its coast, war-torn Yemen, from which Djibouti has taken in hundreds of thousands of refugees.

Despite this seemingly unstable situation, the country's authorities have skilfully taken advantage of it by basing their entire strategy on a exceptional geographical environment Djibouti: the chance to be at the crossroads of one of the world's busiest shipping lanes, on the shores of the Red Sea and the Gulf of Aden. The result is Ethiopia's privileged access to the sea and an endless stream of container traffic on the road between the two countries, as well as on the new Djibouti-Addis Ababa railway line. Backed by these advantages, the country is now able to post an annual growth rate of 6.5%.

Reflection on the country's strategy

" Djibouti's strategic location was really the decisive factor that stopped the whole project in its tracks. development strategy of the country. The main thrusts of the plan were to develop activities around the port and the road that passes in front of Djibouti, i.e. the entrance to the Bab-El Mandeb, which carries 30 % of the world's maritime traffic.says Ahmed Osman, Governor of the Central Bank of Djibouti. It's a route of great importance since geopolitical developments have accelerated in the region with the destabilisation of Somalia, the problems of Eritrea and the problems of piracy. All these factors have contributed to a rethink of the country's strategy, and it has decided to transform itself into a commercial hub well secured so that trade can develop and serve as a platform for the rest of Africa ".

It's a message that the international business community has heard loud and clear. In 2017, the country created for the first time an international economic event, which is now held every year in December: the Djibouti International Fair. Interest has grown with each edition: 320 companies and organisations had a stand in 2018, compared with 200 in the first year. More than 10,000 visitors come to the event.

To make it easier for the business community to travel to the country, the Djibouti authorities have recently introduced a fast-track visa-on-arrival procedure and are continuing to develop top-of-the-range hotels for foreign visitors. A Franco-Djiboutian Chamber of Commerce was set up two years ago to facilitate exchanges between French businesspeople and promote a better understanding of the country's economic fabric.

For while the opportunities are real, the obstacles persist in an economy that is still poorly equipped for investment. In 2019, Djibouti nevertheless managed to move up around 50 places in the World Bank's Doing Business ranking, rising to 99th place.^th out of 190. This progress is due to a number of reforms, including that of a one-stop shop for business start-upsThis will include improvements to procedures for transferring ownership and accessing credit by broadening the definition of accepted collateral, as well as the creation of a specialised court for commercial disputes.

"Vision 2035

Djibouti has embarked on a national strategic plan, "Vision 2035which aims to triple the average annual income per inhabitant and create 200,000 jobs over the next fifteen years, with ramifications throughout the economy. For example, the transport and infrastructure sector, which accounts for a significant proportion of the country's growth, has benefited over the last two years from a number of new projects. spectacular facilities After the multi-purpose port of Doraleh, inaugurated in the capital in May 2017, Djibouti took delivery of the port of Ghoubet, dedicated to the salt trade, for an investment of 64 million dollars, and the port of Tadjourah, an investment of 90 million euros intended for the export of potash.

Then, in January 2018, the country was able to open to the public a new Djibouti-Addis Ababa railway line 754 km long to replace the old facility built in 1917. Today, this traffic is mainly goods traffic: of the five trains that travel daily between the two countries, four are convoys that can carry up to a hundred containers. Eventually, 4 to 5 million tonnes of goods a year should be transported directly from the port of Doraleh to Ethiopia by rail.

However, these major projects, which have not yet begun to inject much domestic growth, are already giving rise to some concern because of the debt they are creating for the country. In fact, all these projects are part of a very ambitious programme and are financed by loans from China, and to a lesser extent the Middle East, to link existing production zones in Ethiopia and the Celkesen being created in Djibouti to Asian economies. The strategy is part of China's One Belt, One Road Initiative, unveiled in 2013, which aims to link 60 countries across three continents, with Djibouti playing the role of gateway between East Africa and Asia.

At the end of its mission to Djibouti in 2018, the International Monetary Fund (IMF) noted that, although these investments in infrastructure to transform Djibouti into a logistics and commercial centre undeniably offered advantages for the country's economy, they also had a negative impact on the economy. growth opportunities, " the financing of this strategy through an increase in debt had led to a tense situation which poses significant risks ". Public debt reached 104% of the country's GDP at the end of 2018.

Telecoms hub and green energy

Faced with this pressure, the authorities are pulling all the levers linked to the country's advantages, particularly the security aspect with several international military bases. They represent sources of annual rental income estimated at several tens of millions of dollars, as well as significant outlets for numerous foreign contracting companies. Today, the country is home to France's largest permanent military base in Africa, with 1,450 troops, as well as a 200-hectare American military base housing nearly 3,200 military personnel and more than 3,000 civilians. Smaller Japanese and Italian contingents are also present.

Djibouti relies on its international guests to establish a precious status quo, but the installation in 2017 of a gigantic Chinese base housing 10,000 soldiers near the new port of Doraleh has greatly worried its Western partners. However, this climate is not necessarily bad for business: Djibouti is now as attractive to companies as it is to the military.

There are at least two areas that the business world is watching closely. The first is telecommunications hub Djibouti represents, with seven submarine cables, including three international ones, passing through the country. They are interconnected and the territory plays a key role in maintaining the system and providing a whole range of associated internet services. Already, a dozen foreign operators and internet service providers have set up in a data centre opened in 2013 from which traffic transits from one continent to another.

And finally.., green energy is at the heart of all expectations. Solar power stations, rural electrification, development of the prodigious geothermal resources in the Lake Assal region: here too, investors are lining up, like France's Engie, which has signed a memorandum of understanding for the development of a photovoltaic solar power station. The country is working on all fronts to make the most of its superb but arid environment, and intends to base its growth on the opportunities offered by the economy of the future.