Most people have never heard of Djibouti and even more couldn't locate it on a map. Thanks to its strategic location and accessibility, the country is well on its way to becoming Africa's top investment destination. Wedged between Ethiopia, Somalia, Eritrea, the Red Sea, and the Gulf of Aden Djibouti has a thriving harbor which supports its inland neighbors. With airline connections to Paris, London, Dubai, Addis Ababa, Jeddah, and Nairobi and its proximity to the wealthy gulf states, foreign investors are betting that Djibouti will become a business and shipping hub for Northeast Africa. As a result, Djibouti's economy is growing and there are planned developments in the works, such as the intercontinental bridge, the Djibouti-Ethiopia railway, and an airport expansion. The country also boasts stability and one of the world's most business-friendly environments.
Safety and Stability
Although the US State Department gives Djibouti a high crime threat index, the truth is that crime rates here are still far lower than what they are in the US. According to INTERPOL data, the murder rate here is one-third lower, robberies are 75% lower and rapes are over 85% lower than rates in the US.
Unlike its neighbors that have been wrought with conflict over the past few decades, Djibouti has remained relatively stable since independence in 1977. Its stability has made it the chief recipient of regional investment dollars. If safety is still your concern, it's certainly worth mentioning that both France and the US have maintained military presence here--both undoubtedly realize Djibouti's strategic importance.
Foreign Direct Investment
Djibouti's government strongly encourages investment in national industries and has pursued open economic policies. You'll find very few business regulations and even fewer restrictions on foreign direct investments. Investors have noticed that the government is quick to respond and is extremely cooperative. Consequently, investment here has been explosive. Since 2000, the economy has been growing at a brisk 5% average annual rate and foreign direct investment has ballooned from $ 3 M to $176 M. Officials expect GDP growth to be closer to 7% in 2008 and for foreign direct investment to continue to grow.
In 1995, Djibouti was declared a free-export processing zone and has since seen a host of new investment projects:
- Dubai International has poured over $2.2B in the construction of a deepwater port and oil terminal at Port Dorale, the management of Djibouti Port, Djibouti International Airport, and the Djibouti Free Zone (through Jafza International), including the country's first and only 5-star hotel.
- Dubai Customs World has built Glafi Post, a checkpoint on Djibouti's border with Ethiopia. It's now the busiest transit point for land-locked Ethiopian cargo trucks headed to and from the port of Djibouti.
- Italian consortium Consta-Joint-Venture will contribute 50M euros for the restoration and upgrade of the Djibouti-Ethiopia Railway.
- Kuwaiti Al-Ghanim & Sons Group plans to partly invest in both the Djibouti-Ethiopia railroad and in desalination plants in the country.
- Qatari Diar Real Investment Co (Qatar Investment Authority) plans to construct a 300,000 sq ft. mixed-use project in Djibouti city.
- Dubai-based Middle East Development, LLC released its plans to construct a Red Sea bridge linking Djibouti and Yemen. The $200 B project is scheduled to be completed in 15 years and will be 28 kilometers long. San Francisco-based Bechtel has also expressed interest in participating in the project.
- In close relation to the transcontinental bridge construction, Al-Nour Holding company CEO Tariq Bin Laden has conceptualized the Al-Nour (Al-Noor) twin cities on either side of the bridge. The ultra modern cities will be full of glass skyscrapers, beachfront communities, and superb infrastructure. The project's goals include an integrated regional economy.
- Washington, DC-based Emerging Capital Partners (ECP) has invested more than $30 M to develop one of the largest salt reserve mines in both Djibouti and the world.
- IFC and Reykjavik Energy (Iceland) have signed a contract for the development and exploration of Djibouti's geothermal energy resources.
The government has identified key sectors that it hopes would attract foreign investment: port, tourism, manufacturing, and telecom. You'll be happy to know that you can receive assistance at the National Investment Promotion Agency (ANPI, for its French name), whose goal is to become a one-stop shop for all your foreign investment needs (Click here for further details). As a member state of the Multilateral Investment Guarantee Agency and a recipient of Overseas Private Investment Corporation programs, Djibouti offers investors up to $400 M in insurance against non-commercial risks. Furthermore, investments of more than $280,000 are eligible for exemptions of license and registration fees, as well as property and corporate taxes.
As you can see, Djibouti is in its beginning stages of long term development and economic growth. With investments from wealthy Gulf states and through the government's attractive business climate, the country has a long way to go to realize its full potential.
Photos courtesy of Tourism Encyclopaedia Britannica.
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