East Africa

Djibouti: A new magnet for investment in the Horn

Djibouti: A new magnet for investment in the Horn
  • PublishedApril 5, 2020

Djibouti’s new investment drive has been spectacularly successful but work is still going on apace to make it a rival to the likes of Dubai, as Mahdi Darar Obsieh, DG, National Investment Promotion Agency (NIPA) explains.

What is the mission of the National Investment Promotion Agency?

We have three main missions: first, carrying out ongoing diagnostics of the state of development of the private sector; second, the promotion of investments, with the objective of directing both domestic and foreign private capital towards promising sectors; and third, driving partnerships and networking between private domestic and international operators by implementing sizeable projects involving the transfer of technology and knowledge.

What measures are in place to encourage investment? 

In terms of administrative procedures, this is done through the one-stop-shop inaugurated by the Head of State in 2017, which hosts the representatives of 15 government institutions to provide synchronised services to economic operators, cheaply and efficiently.

The facilities available range from assistance with starting a company to obtaining services such as electricity, telecommunications and water, and also include visas, residence permits, work permits, etc. We also offer structural facilities, including in terms of business premises, and legal and marketing advice. 

The World Bank’s ‘Doing Business’ ranking, which assesses the ease of doing business in 193 economies, has ranked Djibouti among the 10 most reforming countries for three consecutive years!

What are the main reforms being undertaken? 

There is a significant reform in commercial justice, with the revival of the Commercial Court and the training of specialised judges. There has also been a substantial reform of the Civil Code and the Code of Civil Procedures that were over one hundred years old.

An information system has also been deployed in the jurisdiction to further accelerate and clarify procedures for settling disputes. There is also now the publication of commercial justice rulings made by the Supreme Court. 

Another major reform concerns access to financing. The Central Bank has developed a national payment system (SNP), a register of loans, a register of guarantees, and laws on leasing, payment orders etc, to reinforce guarantees for creditors.

There have also been major reforms in terms of starting businesses. A Presidential decree has ordered a maximum of three days for the formation of a company and the current average is just one day. In terms of costs, it has gone from an average of $2,000 to just $150. This has resulted in business start-ups trebling in the very first year. We have thus gone from an average of 450 per year to over 1,500. 

What is the impact on investment? 

Investment is undergoing an exponential increase. Over 2015-2019, private investment reached about $2bn, with the consolidation of over 5,000 direct, full-time jobs.

There is an expansion in the industrial sector which accounts for about 30%. This strong rise in industrial investment has given the country import substitution, or even export, capacity. Food products, building materials, office items and even locally assembled 4- and 3-wheel vehicles, are exported in the sub-region. Not to mention the free trade zone, which is really going to play a pivotal role. The trade balance will obviously benefit hugely.

Some 60% of investments are international and 40% domestic. Among the international investors, the majority are from Arabic countries, with the United Arab Emirates in first place with investments in industry, including a cement works and a reinforcing rod factory, as well as in tourism, hotels and real estate, and among other areas, retail and distribution (shopping mall) services.

Djibouti is also seeing investments originating from Somalia and Ethiopia, especially in banking, real estate and tourism. We should also mention Chinese private investments in the value chain for salt, and in real estate and hotels.

They are currently implementing major hotel projects to optimise the country’s natural potential and turn it into an international destination that could even rival Sharm El Sheikh, with its well-preserved, heavenly beaches. 

Are we seeing a new country emerging?

We are seeing a spectacular transformation of the structure of the economy, and also the country’s social structure, with major efforts to develop the human capital. Djibouti is thus following, or even overtaking, Dubai, which had less potential than Djibouti to begin with.

Djibouti is also a beneficiary of the EU-ACP agreement, AGOA, and the Greater Arab Free Trade Area Agreement. We wear two hats, Arab and African, the result of our history as a country at the crossroads of civilisations, of being a ‘land of exchange and encounter’ that we are trying to optimise. 

Written By
Neil Ford

Neil is a journalist, writer, editor and consultant, specialising in international and African affairs.

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