Djibouti Emerging As A Trade Hub

With its strategic geographical location, Djibouiti is fast emerging as a regional and international trading hub

Djibouti’s spectacular strategic location is its main economic asset. The large, well equipped Port of Djibouti, managed since 2000 by Dubai Ports World, straddles the juncture of sea routes between the Far East, the Arabo-Persian Gulf, Africa, Europe, and the East Coast of the United States.

It serves as a gateway to internal African markets. Transshipment is growing, and currently accounts for approximately 20 per cent of port business. The new Doraleh Port project is expected to quadruple revenues and significantly benefit Djibouti’s economy.

Services provided by Djibouti’s port, airport, financial institutions, and related sectors account for more than 80 per cent of GDP. In recent years, intensive port activities, improved management, financial aid from the United States and France, and, especially, Foreign Direct Investment have significantly improved Djibouti’s economy.

Djibouti has moderate tax rates. The top income tax rate is 24 per cent. Other taxes include a property tax and an excise tax. In the most recent year, overall tax revenue as a percentage of GDP was 20 per cent.

Djibouti’s financial sector has been growing as more banks, particularly foreign banks, have entered the market. One majority French-owned bank and one fully French-owned bank together account for 95 per cent of deposits and 85 per cent of credit. The government retains 33 per cent stake in “Banque pour le Commerce et l’Industrie Mer Rouge” while the Yemen government retains 16 per cent, the country’s largest commercial bank. The government has made efforts to promote the integrity and efficiency of the banking sector and adopted new banking laws in 2000.

Djibouti has pursued a moderate foreign policy. Djibouti’s population is estimated at more than 890,000. French and Arabic are the main languages used in government, business and daily activities. English is becoming more widely spoken for professional purpose.

The country is also on the lookout for skilled manpower and professionals to help in its development plans. On a recent visit to India, President Ismail Omar Guelleh invited Indian businessmen and skilled workers to explore opportunities and invest in areas such as oil and tourism. “We are here to welcome the Indian business community to our country,” Ismail Omar Guelleh, said at a meeting organised jointly by the Confederation of Indian Industry and the Federation of the Indian Chambers of Commerce and Industry.

The President asked the Indian business houses to export skilled manpower to Djibouti and said, “We have a shortage of skilled manpower in our country so imports are welcome. We will need Indian knowhow in the Doraleh port facility which is coming up,” the president said.

Future development of Djibouti requires the transformation of the country into a hub for trade, logistics and related services, and financial services. The authorities are working on the exploitation of the country’s geothermal energy in order to completely lift energy constraints. The country has significant opportunities to expand its port activities with the recently independent South Sudan a big potential new market. The country is also targeting trade with the landlocked countries in the Great Lakes region.