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Celebrating the 35th year of independence this month, President Ismael Omar Guelleh has overseen a period of sustained growth that only slowed marginally during the global economic downturn.
Djibouti June 2012 New African Magazine  43
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Anticipating further growth
Djibouti Raising its game
Djibouti continues to post enviable economic growth figures, and for President Ismail Omar Guelleh’s government the priority is keeping up this momentum and meeting the challenges that lie ahead. Stephen Williams reports.
D
jibouti is celebrating its 35th independence anniversary this month. It is a time for reflection for this small enclave that is so strategically important to the world and Africa’s economy. It is also a time to look towards the future and the best way forward. Djibouti’s economy continued to grow last year by around 4.5% and the country carried on attracting foreign investment. Essentially, this investment was focussed on Djibouti’s most valuable asset – its location at the southern entrance of the Red Sea and the business and trade that it serves with deep-water ports. Its ambition to serve as the Horn of Africa’s gateway to, and for, sub-Saharan Africa has, in many respects, already been achieved. There is a sentiment that suggests that Djibouti should become for the Horn and East Africa what Dubai has become for the Gulf – an entrepôt that can serve as a modern and highly efficient trading hub for the region. Driving this vision forward, the government has given the green light to place the port (and the airport) under private management contracts, and is building the second stage of a new container terminal at Doraleh, with an adjoining oil terminal and transhipment complex. The expansion of the Doraleh port has benefited from a $427m guarantee by the Multilateral Investment Guarantee Agency for the development, design, construction, management, operation and maintenance of the container terminal. In addition, as a means of underpinning Djibouti’s position as a hub for trade, logistics and related services, the country has embarked on building several road corridors.
Djibouti’s maritime ports are the country’s prime asset
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OVERVIEW
The Republic of Djibouti Fact file
“Over the years, this tiny country has developed as an entrepot that can serve as a modern and highly efficient trading hub for the region”
Head of State
President Ismail Omar Guelleh
Population
906,000 (UN, 2011)
Capital
Djibouti-ville
Area
14,250 sq km (8,900 sq miles)
Major languages
French (official), Arabic (official), Somali, Afar – English widely-spoken for commerce
Monetary unit
1 Djiboutian Franc (freely convertible)
Main exports
Hides, skins and re-exported Ethiopian coffee
GNI per capita
$1,270 (World Bank, 2009)
Surface area
23,200km
“The Nepad Heads of State and GovernmentCurrency: EritreaAfrican Committee, composed of 20 GDP at market prices (2010) leaders, meets every six months, which Real GDP growth rate (2010) FDI inflows (2010) clearly helpsEthiopia to keep Nepad’s development FDI Stock (2010) trajectory moving forward.” Khor Angar
Assa Gueila
Dorra
Djibouti Randa Galafi
Obock
Tadjoura
Djibouti
Hol Hol
Lake Abe Daouenlé
Somalia
$1.129bn 3. 5% $28.215m $878m
Exports of goods and services (2010)
$440m
Imports of goods and services (2010)
$497m
Main export sector
Salt, livestock and fishery resources
Main destinations of exports (2010)
Somalia, Ethiopia, Yemen and the Gulf
Main origins of imports (2010)
France, UAE, Saudi Arabia, India, China, Ethiopia and Somalia
Lake Assal Yokobi
Djibouti Franc (DJF)
Ethiopia
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OVERVIEW
By improving container facilities in Djibouti, the idea is to stimulate an increase in port traffic and open up new opportunities for investment and growth, including attracting other African countries to use the port as a trade gateway. Djibouti has also established a Free Zone to bring in manufacturing companies. A new $300m airport upgrade is under way. A $400m ship maintenance yard, and a $100m desalination plant (for the Doraleh project) are also currently being built. In the longer term, Djibouti must be fully prepared to compete with the proposed new port being constructed at Lamu, Kenya – further south on the Indian Ocean littoral – which could pose a threat to its own port operations. Lamu, and the new rail links that will serve the port, would certainly prove attractive to both Ethiopia and South Sudan – the former currently being Djibouti’s major trading partner. Meanwhile, the country’s capital flows have more than doubled to a very respectable 21% of GDP, consequently creating a balance of payments deficit of just 1.1% of GDP. But, as the World Bank points out, the balance of payments account is likely to widen as the launch of Djibouti’s numerous projects will involve the importation of a considerable amount of capital goods. However, the Bank adds that the deficits will not present a problem, as FDI, and external borrowing can comfortably finance them. More worryingly, the country’s recent economic growth has done little to reduce the unemployment numbers, as even the massive investments in the port and free zones have not generated enough jobs – and clearly Djibouti is highly vulnerable to external shocks such as rising food and fuel prices. By way of a response, the government has launched the National Initiative for Social Development (INDS) to meet various social and economic challenges. The objective of this new policy is to promote access to basic social services and improve the quality and effectiveness of their delivery. INDS has a $47m budget to focus on health, energy, rural community development and urban poverty reduction. Meanwhile, government has acknowledged the need to identify the sectors that can drive growth while creating jobs and plans to market Djibouti’s many attractions as an investment destination. Specifically, the country is positioning itself as a regional centre for the importation, warehousing, value-addition and re-export of goods originating in neighbouring countries. Djibouti’s geological characteristics, lying on the Great Rift, make it especially suitable for geothermal energy generation – a capital-intensive clean energy source that involves pumping water deep underground to be heated, creating steam that is brought to the surface to drive steam turbines generating electricity. It has also identified the financial sector as a prime area for growth. The government has already passed several new pieces of legislation, notably regulating capital requirements, and relating to both financial cooperatives and Islamic banking institutions. Another sector deemed to hold considerable promise
is tourism. Djibouti offers ready access to some of the best scuba diving sites in the world, and the wealth of ocean life in the Red Sea is truly astounding. From the highly endangered horn-billed turtle to the shark-whale, and the multitude of brightly coloured tropical fish that, along with the wonderful coral, call these waters home, this is Djibouti’s top tourism attraction. The Gulf of Tadjoura (especially around the town of Obock) contains many species of fish and coral, and is ideal for diving, snorkeling and underwater photography. Waterskiing and windsurfing are also on offer. On dry land, Lake Assal is surrounded by a strange lunar-like landscape of dormant volcanoes and lava fields, and is less than 100km south-west of Djibouti city. It is one of the world’s lowest points, and also one of its hottest areas. You can only reach it by 4x4 vehicle (or camel). Lake Assal is the centre of a nascent salt-mining initiative. n
Top: The crystal clear waters of the Red Sea are a world-class diving attraction. Above: Lake Assad, for centuries the centre of a trade in high quality salt
Useful contacts Bank of Djibouti (Banque Centrale de Djibouti) Avenue St Laurent du Var, B.P. 2818, Djibouti Ville Tel: +253 352 751 / 355 043 Fax: +253 356 288 Chambre internationale de commerce et d’industrie de Djibouti Place Lagarde, B.P. 84 Djibouti Tel: +253 351 070 Fax: +253 350 096 National Investment Promotion Agency (NIPA) Marseilles Street, B.P. 1884 Djibouti Tel: +253 312 102 or 312 113 Fax: +253 358 837 E-mail: anpi@intnet.dj Website: www.djiboutinvest.dj Ministry of Tourism B.P. 79 Djibouti Tel: +253 352 540 Fax: +253 353 290 Office National du Tourisme de Djibouti (ONTD) National Tourism Office Place du 27 Juin, B.P. 1938 Djibouti Tel: +253 352 800 or 353 790 Fax: +253 356 322 E-mail: infotourisme@intnet.dj Website: www.office-tourisme.dj
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Djibouti Special
Integration is the objective
Vision 2035
A long-term development plan For Djibouti’s Minister of Economy and Finance, Ilyas Moussa Dawaleh (pictured below), the need for forward planning is imperative. In this interview with New African, he describes Vision 2035 and the challenges and opportunities that now confront the country.
Right: The new container terminal at Doraleh provides Djibouti with new handling capacity,
Djibouti’s economic success is intrinsically linked to the wider region. How would you characterise the relationship with your development partners at this time? Djibouti has limited resources and a relatively small population. However, Djibouti’s location has a key strategic geographic position. As one of our colleagues from the IMF mentioned: “The geo-strategic position of Djibouti means the same thing that oil means to Saudi Arabia.” Of course, this unique location means that we must sustain the momentum regionally to facilitate greater trade and integrate our economies, making sure our neighbours are able to take advantage of our logistics and related services. For example, Ethiopia has, over the last 15 years, experienced a high rate of growth, and needless to say, the more Ethiopia grows the more the Djibouti economy follows suit. Djibouti’s GDP is linked specifically to the port and other logistical services, which in tandem is
Would you outline Djibouti’s Vision 2035 concept and its objectives? We used to formulate very short-term national policies, sometimes on an annual basis but we realised that there were a lot of challenges ahead and risks on the way. For this reason we needed to plan over a longer period. We accept that we will probably not be able to achieve all our objectives during the current administration, but Vision 2035 clearly sets out the aspirations of the President and his government. We also want to encourage Djiboutian citizens to take ownership of this vision themselves, as they have a key role to play. We believe that with this initiative we are encouraging Djiboutians to achieve their own success in what is now a fast-paced and very competitive new world. The Vision 2035 is also based on the key pillars of encouraging economic integration, good governance and human development. This all means increased communication with the people to inform them of the wider opportunities that are available to them.
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where Djibouti will play a key role. We are also planning a cross-border industrialisation programme, to add value to our exports. We need to create a cross-border duty-free zone to integrate Djibouti’s economy with Ethiopia’s and provide a gateway to other economies in the region of commercial interest, such as South Sudan. Internally there are some challenges to growth and investment in Djibouti, namely high energy costs and water stress issues. What initiatives does the ministry have in place to combat these problems? These are two major concerns regarding Djibouti’s economic development, and we are actively seeking strategies to address them. The geothermal electricity generating programme is the number one priority of Djibouti’s government and our geothermal potential is acknowledged as one of the largest in the world. We plan to couple this potential with other renewable energy projects such as solar and wind energy. By tapping into these assets with the assistance of our development partners being led by the World Bank, we are confident of resolving our energy problems in the next three years and we may even be in a position to export energy. Already we have embarked on the first salt lake geothermal development plan. We are also looking at solutions to our water supply constraints and have an EU desalination project and other public-private partnership programmes. We also bring water from Ethiopia for some areas of the south of Djibouti, and at the same time we are conducting our own research and development with highly skilled engineers. We anticipate that the challenge of water will, like our energy sector, be tackled successfully in less than three years.
“THIS UNIQUE LOCATION MEANS THAT WE MUST SUSTAIN THE MOMENTUM REGIONALLY TO FACILITATE GREATER TRADE AND INTEGRATE OUR ECONOMIES.”
connected to the growth of the Ethiopian economy. This is why we are working with the Ethiopians on a long-term vision to ensure Djibouti remains stable, competitive and has access to international markets. This will ensure our relations with Ethiopia continue to flourish as it embarks on its industrialisation drive. One of the key points to their industrial development is that the whole process must be integrated, meaning competitive logistics must be in place, and this is
What message would you like to get across to our readers about Djibouti today and the country’s investment opportunities? Djibouti certainly has the potential to become another Singapore, Hong Kong or Dubai and there are myriad investment opportunities here related to our unique geostrategic location. Equally importantly there are many untapped business sectors such as tourism. I believe we have the possibility of becoming one of the top marine tourism attractions in the world, if the requisite infrastructure and facilities are put in place. We welcome international investors to come and take advantage of these opportunities. We are already working hard with our partners and neighbouring countries to create critical infrastructure such as roads, airports and dry ports to serve as a gateway not just to the rest of Africa but also to the Gulf region as a whole. Another area of investment potential is telecommunications and our telecommunications ministry is inviting major international players to Djibouti to make use of the most advanced sub-sea fibre-optic cable facilities in Africa. This is just a snapshot of some of the opportunities available in Djibouti today, and there are many more! n
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Djibouti-Ethiopia
A partnership for progress Djibouti and neighbouring Ethiopia enjoy a particularly close and mutually beneficial relationship. With trade set to increase, infrastructure links are being upgraded.
n order to handle the growing volumes of cargo flowing to and from Ethiopia, the Djibouti government not only privatised the country’s ports but also contracted one of the world’s foremost port operators, Dubai Port World (DP World) to optimise operations. This has led to productivity increasing exponentially, so that today the Port of Djibouti is one of the world’s leading ports, not just in terms of volumes – currently with a capacity amounting to 1.5m 20ft equivalent containers a year – but the standard measures of a port’s efficiency. These measurements include criteria such as the movements of cranes each hour and ship turnaround times, critical areas when the choice of trans-shipment terminals is made by global shipping lines. Furthermore, Djibouti has built one of the biggest oil storage and handling complexes in Africa at Doraleh. This terminal, built at a cost of $120m, has two berths with 20m drafts, and operates around the clock to handle 3m tonnes of fuel a year. The terminal can, in fact, pump 2,000t of fuel an hour as well as liquefied gas. These two facilities are crucial not just for Djibouti, which remains a net energy importer, but also the region as a whole, and especially landlocked Ethiopia. When disputes between Ethiopia and Eritrea led to conflict, Eritrea closed the ports of Massawa and Assab to Ethiopian goods, and ports that Ethiopia had used since before Eritrea’s independence, when the two countries were one unified entity, were denied to them. Suddenly, without access to the ocean, Ethiopia was in a dire situation. It simply had to find alternative routes to the ocean for its exports like coffee, livestock and flowers – and for imports to fuel the country’s economy. Ethiopia has Africa’s second-largest population and is one of the continent’s fastest growing economies, but it was Ethiopia’s great fortune to have Djibouti as a neighbour with the capacity to assist. The Port of Djibouti’s operations today are dominated by Ethiopia’s imports and exports, which comprise over 90% of the total throughput – although, of course, Djibouti handles significant trans-shipment volumes, i.e. where trade goods are offloaded at the port and then forwarded on a different vessel to other world destinations.
Consequently, relations between Ethiopia and Djibouti are particularly strong and mutually beneficial. Not only does Ethiopia depend on Djibouti for the transit of its trade goods, but Ethiopia also supplies essential foodstuffs to Djibouti. The establishment of a Free Trade Zone adjoining the port has also been a boon to both countries. Not only were Ethiopian companies able to establish operations here in proximity to the port, and to conduct business under a fiscal regime that was essentially as conducive as that within Ethiopia proper, but Djibouti was able to offer multi-dimensional services within the zone. The country is also pioneering an air-sea-land link for landlocked countries within the region. Djibouti Free Zone is currently home to over 100 leading regional and global companies including BMMI, SDV Bollore, and Seven Seas. It has emerged as one of Africa’s leading trading and distribution hubs. The strategic location of the free zone allows companies located in DFZ to serve not just Ethiopia but 380m people in 19 countries in East and Central Africa. It is also recognised that the energy sector is a further spur for co-operation and with tremendous opportunities for strengthening regional integration both within the Horn of Africa and the Eastern region of the continent. The African Development Bank has already financed the electrical interconnection network between Djibouti and Ethiopia. However, on the horizon is the potential to generate massive amounts of power in Djibouti by exploiting the country’s geothermal assets. Located at the junction of three tectonic plates, Djibouti has significant geothermal potential, and with many points beneath sea level and lying on the Great Rift Valley, drilling presents a more viable and affordable option to many other places. Geothermal energy production is a well-developed means of generating affordable electric power. It consists of drilling wells deep towards the earth’s magma to locate suitable hot rocks. Once found, water is pumped down to be super-heated and extracted as steam to drive turbines. The main problem is the cost of the initial exploration wells, but Djibouti’s policy is to offer opportunities for strengthening regional integration by Public Private
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PORTS
Above: The Addis Ababa terminal for the Djibouti-Ethiopia railway line. Left: The Port of Djibouti has been crucial for Ethiopia as a gateway to world markets
Partnerships (PPP) complemented by Development Finance Institution funding for geothermal projects. The government of Djibouti has already given the green light to one such project, reaching agreement for a $20m programme with the Global Environment Facility, World Bank and OPEC. The development phase will be in the form of a public private partnership. The drilling of exploratory and production wells is scheduled to be completed by 2013 with generation capacity of 56MW coming on stream by 2018. Certainly, the African Development Bank envisages providing assistance in the establishment of a regional
approach to energy projects, including the development of a blueprint, a harmonised policy framework, regulations and investment, capacity building, project financing and mobilisation of resources towards a response to the global climate change challenge. Meanwhile, Ethiopia is harnessing its hydroelectric generation capacities with both countries also developing green-energy solutions to further complement geothermal Early next year, a €35m desalination plant and an adjoining windfarm supplying 20MW, will begin construction with a view to completing by the end of 2014. There is also a 62MW wind farm being proposed for the Ghoubet region. By 2018, Djibouti has the ambition to be one of the first countries in the world to have 100% of its electricity consumption from renewable energy. Further cementing the close relationship between Ethiopia and Djibouti is the latter’s investment in Ethiopia’s hydroelectric programme. Djibouti is the largest foreign buyer of bonds that Ethiopia has issued to finance the River Abay (Blue Nile) hydroelectric facility. Djibouti’s investment in the Grand Ethiopian Renaissance Dam amounts to $1m. Djibouti needs reliable and affordable power supplies to bridge the energy gap that is envisaged will impact the country before new energy projects in the pipeline come on stream. Djibouti was the first country in the region to buy electric power from Ethiopia, with 35MW of electric power supplied beginning May 2011. The importance of co-operation in completing major infrastructure projects is central to the policies of both countries. This becomes clear from the numbers of projects that are now being embarked upon. Quite apart from energy interconnections, the rehabilitation of the Djibouti-Dire Dawa highway and progress in the construction of the Northern Corridor (Dorra-Balho); the rehabilitation of the Djibouti-Ethiopian Railway and construction of a new rail corridor to the north, Tadjourah-Mekele; as well as the construction of the Port of Tadjourah, are indications of the two countries’ commitment to this common vision. A leading Chinese railway construction company, “China Railway Engineering Corporation” (CREC), will build the new Addis Ababa–Djibouti railway track for both freight and passenger transport. The 656km route will connect Ethiopia’s capital Addis Ababa with the port of Djibouti and be electrified by as yet unannounced renewable energy sources, quite possible solar. While there is an existing track in use along this route, the new railway, it is confidently stated, will reduce the travel time from Djibouti port to the Ethiopian capital by more than 50%. This should contribute handsomely to the economic development of Ethiopia’s hinterland through which the railway will be routed as well as relieve some of the burden on the two countries’ road networks. Longer term, this rail link will serve as a key component of the proposed trans-continental East to West African Railway Network. A rail link for Djibouti, Ethiopia and South Sudan originating from Djibouti and terminating in Juba is also in the preliminary stages of a consultation process, having been first mooted during the region’s Third Infrastructure Council meeting held in Djibouti in 2009. n
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Djibouti Special
The splendours of heritage
Culture serving the nation Culture and communication are two elements of a single ministry that is pursuing a strategy of supporting the arts and building national pride.
he Ministry of Culture and Communication is responsible for Posts and Telecommunications as well as implementing the Head of State’s strategic objectives and government policies for promoting the country’s cultural identity. The culture portfolio focuses on the arts, crafts, artisans and the creative industries that serve to promote Djibouti. The main development over the next five years is to increase telecoms penetration and expand the infrastructure throughout the whole territory. Other objectives include the strengthening of the Regional Telecommunications Hub of Djibouti, the democratisation of access and use of ITC at the national level, and the fight against the digital divide. Working within the Ministry, the Directorate of Posts and Telecommunications is undertaking a reassessment of policy pertaining to the ICT sector. It wants to enhance progress, define new objectives, develop an adequate strategy to achieve these goals, and formalise the action plan for an efficient implementation. Djibouti is one of the beneficiaries of the African Virtual University/African Development Bank/Nepad joint programme that initiated a teacher education programme six years ago. The programme revolves around the use of ICTs both in and across the curriculum, with a particular focus on mathematics and science education. The use of ICTs across the teaching curriculum will greatly contribute to improving the quality and increase the number of teachers through flexible, affordable delivery using open, distance, and e-learning systems. Furthermore, USAID’s Djibouti Assistance to Education Project (also known in French as Assistance Internationale pour le Développement de l’Education), is a three-year effort that was started in 2010 to improve student learning. The objective will be pursued through three separate but interlocking sets of interventions linked directly to the three intermediate results of increased access to basic education, improved quality of teaching and learning, and increased opportunities for girls’ education. The SchoolNet and Cisco Academy
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city and its rich history. This strategy maintains the twin values of the quality of life enjoyed by Djiboutians and a rich cultural environment. The creative industries also serve as an invaluable complement to Djibouti’s growing tourism attractions. Government is determined to serve its citizens by providing adequate opportunities for the public to have access to cultural events and does what it can to support the artists, actors, writers, poets and all the professionals that work in this field. It is considered absolutely essential to promote sustainable development that recognises the importance of Djibouti’s heritage. Broadly, there are six areas where the state plays a role. They are in the dissemination of arts and culture; the recognition and support of a dynamic environment for the arts to flourish; promoting Djibouti’s cultural assets; providing information, especially within the education system, to stimulate cultural awareness and participation; to research and preserve Djibouti’s historical sites; and act in partnership and consultation with all stakeholders.
initiatives fall under this project. Through this project USAID donated computers, printers and UPS’s to four schools in rural Djibouti. Djibouti Telecom, a partner in the project and the national telecommunications service provider, deployed local area networks and provided internet connectivity to four schools. The Education Ministry has made capacity-building a priority for teachers in the use of ICT through the National Education and ICT project and the automation of the Education Ministry itself. At the secondary school level some schools, through donors and NGOs, have managed to equip computer labs and establish connectivity provided by the country’s telecom company, Djibouti Telecom. Celebrating Djibouti Celebrating the country’s pride, and recognising the individual contributors who act as Djibouti’s cultural ambassadors, not only presents a positive statement to the outside world but reaffirms a strong sense of inclusiveness within the country amongst the general public, of belonging within a region and identifying with the
Above: Government policies affirm a sense of national pride; while Minister Abdi Houssein Ahmed (above left) has urged a revitalisation of the local media industry
Press and communications The Ministry’s mandate includes oversight of press and communications. This department’s main task is to coordinate the activities of the national media and to mobilise coverage of major events. It is accepted that there is the need for a revitalisation of the media industries in terms of organisation, regulation and legislation. The policy is to support training, improve TV coverage, and promote the national language. The intention is to stimulate the national media to fully play its essential role in the democratic life of the country and to promote to the international media Djibouti’s economic, cultural and tourism successes and future potential. The print and broadcast media has seen significant development and progress. There are currently three newspapers in French, English and Arabic: The Nation, Djibouti Post and Al Qarn. The Djibouti Information Agency and the Radio Television de Djibouti have been reorganised and strengthened with new staff and equipment. Today, all countries in the region (Somalia, Kenya, Ethiopia, Sudan, and Eritrea) and the Arabian Peninsula (Yemen, Saudi Arabia, UAE) are covered by our radio programmes, which substantially increases the audience of Djibouti’s media and the country’s international profile. In line with a government policy of decentralisation, the regional media has been strengthened and autonomous local radio programmes are tailored to people’s concerns. Hundreds of international filmmakers and journalists are also welcomed each year to cover stories on all aspects of life in Djibouti. These range from social to cultural issues to the political and economic developments in Djibouti. There are no restrictions imposed in Djibouti concerning what radio and TV channels can be received. Indeed, four cable companies already operate within Djibouti. Many major radio stations including the BBC, Voice of America and Radio Monte Carlo use Djibouti to broadcast their programmes in different languages. n
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DJIBOUTI TELECOM
Established in September 1999 and the sole provider of telecommunication services in Djibouti, Djibouti Telecom offers of a full range of services from fixed, wireless services (GSM, CDMA), corporate and wholesale IP/DATA to ADSL networks
Although Djibouti Telecom hails from one of the smallest nations in Africa, the company has big plans to increase their customer base, by rolling out plans to become the gateway to Europe. “In five years’ time, I want us to be recognised as the East African countries’ gateway to Europe,” said Abdourahman Mohamed Hassan, Djibouti Telecom General Manager. The company has the strongest presence in East Africa out of all the telecommunication providers, and our customers include international carriers, mobile and fixed
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telephony operators, internet service providers and major government and private sector clients. Our strategy is firstly to reach out providers and our customers by investing on major submarine cables as well as terrestrial cables. Djibouti Telecom state-of-art infrastructure consists of five submarine cables, SEAMEWE3, SEACOM, EASSY, EIG, ADEN-DJIBOUTI and two diverted terrestrial cables to Ethiopia and an upcoming one to Somaliland for their voice and internet needs.
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“IN FIVE YEARS’ TIME, I WANT US TO BE RECOGNISED AS THE EAST AFRICAN COUNTRIES’ GATEWAY TO EUROPE” Abdourahman Mohamed Hassan, Djibouti Telecom General Manager.
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Every operator wants diversity in terms of international linkages at their disposal with the security of a solid back-up so traffic can be diverted by a secure route if necessary. By offering a number of different routes, we become very competitive in the region. The second approach lies in partnering with Top Tier One players so Djibouti Telecom will provide an unprecedented cost effective, high quality global IP connectivity and value-added services. Djibouti Telecom brings the best internet thousands of miles
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closer to east African customers by directly connecting them to Level 3, Telecom Italia Sparkle and Saudi Telecom IP Point of Presence in Djibouti. This means that customers will benefit from Optimized network architecture offering a perfect redundancy, reduced latencies and money saving on Djibouti-Europe link By developing and managing integrated solutions, tailored to its customer’s diverse and most demanding needs, Djibouti Telecom will position itself as the natural telecommunication hub in east Africa.
Djibouti Telecom Tel : +253 21 35 11 10 Fax : +253 21 35 57 57 Site web : www.djiboutitelecom.dj
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Djibouti Special
Djama M Haid – Central Bank Governor
The pivotal role of the Central Bank of Djibouti he last 10 years, Djibouti’s economy has rapidly evolved. The country has experienced a significant expansion of its banking industry, and the formation of specialist financial institutions. To provide the best support for this expansion, an extensive evaluation programme was undertaken leading to a general overhaul of existing legislation. As a result, the Central Bank now not only monitors the money supply, in order to control inflation, but supervises the various financial services crucial to a modern nation-state. The role of the Central Bank can be defined in two broad but interlinked areas: monetary regulation and technical oversight. As far as monetary regulation is concerned, the currency is a potent symbol of the unity and sovereignty of the state, and the issuing of the national currency as legal tender is solely the Central Bank’s prerogative. The Central Bank is required to issue notes and coins in sufficient quantity and quality for the economy to operate smoothly. It also manages the currency reserves to guarantee the value of the Djibouti Franc, which is fully convertible and pegged to the world’s primary trade currency, the US dollar. Furthermore, the Central Bank is tasked with monitoring the money supply, ensuring the Djibouti Franc’s stability and the efficient functioning of the banking and financial system. While the Central Bank is independent of political control, it always assists in the implementation of the government’s economic policies. The Central Bank’s responsibilities also extend to hosting the National Treasury accounts for which it provides all related financial services: portfolio management, collections and payments. However, the Central Bank is prohibited from extending any overdraft or credit facility to benefit the National Treasury. Furthermore, the Central Bank supervises all financial institutions that it authorises to operate in the country. This approval relates to the conditions of incorporation, the suitability of the institutions’ managers as well as the financial activities that are undertaken. Whether the bank is conventional or Islamic, investment or retail, in micro-finance or brokerage, it is under the supervision of the Central Bank regarding finance, credit or deposit activities. This approval can be withdrawn when an institution encounters difficulties that might endanger the interests of its customers.
Djama M Haid, the Governor of Djibouti’s Central Bank, defines the institution’s role as involving two main areas
The mission of the Central Bank is also to prevent the risk of defaults. It has a number of tools to monitor and control all financial activities and it constantly checks the reporting that the financial institutions are required to provide at regular intervals. Shortcomings discovered by these controls are dealt with according to the seriousness of the infringement. A simple verbal exchange with the managers of the financial institution can resolve minor problems, but in more serious cases a warning letter is issued and an injunction can even be served resulting in a temporary or permanent ban. Turning to the Central Bank’s technical role, it takes responsibility in centralising and disseminating financial and economic data, some of which is commercially sensitive and strictly confidential. It strictly never divulges any market-sensitive information or comments on individual institutions. All investigations undertaken by the Central Bank, as part of an internal control or in situ, are strictly confidential and are shared with the managers of the institutions and the relevant departments of the Central Bank. However, more general information and statistics on the country’s fiscal position is collated and released by the Central Bank, including data relating to the money supply, bank deposits and lending, balance of payments etc. Consequently, the Central Bank is required to publish regular and relevant economic studies, collecting and disseminating information to all development partners and stakeholders. Primarily, this guarantees the security of banking activities in the country. For example, all bank loans above FDJ3m ($17,000) are systematically integrated into the Central Bank’s risk analysis, and all payment defaults are entered in a central record of non-performing loans. Another important area of the Central Bank’s technical role is the Compensation Chamber. All of the financial institutions’ operations and the activities of the National Treasury (represented by the Central Bank) are cleared on a daily basis at the Compensation Chamber, which debits or credits the institutions’ current accounts at the Central Bank. In addition, the Central Bank takes the lead in relations with international financial institutions. As the fiscal agent of the State, the Central Bank is the main contact for bodies such as the IMF and the World Bank, with whom it develops technical and financial assistance programmes on behalf of the Republic of Djibouti. n
56 New African Magazine June 2012
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Building a new djiBouti Banque Centrale de Djibouti Telephone: (+253) 35 27 51/31 20 00 Email: bndj@intnet.dj For more information: www.banque-centrale.dj
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Djibouti Special
Djibouti Ports and Free Zones Authority (DPFZA)
Aboubaker Omar Hadi Chairman & CEO
Building a Red Sea gateway for Africa Having been in the shipping business for 30 years, mostly in the Port of Djibouti but also spending three years in Lagos, Nigeria, last year Aboubaker Omar Hadi (pictured below) returned to his country to head the country’s allimportant ports and free zones authority. He talked to New African about his responsibilities and his vision.
So, it is evident that we are using our strategic location on one of the most important and busiest sea routes in the world, and we believe that by targeting the port’s trans-shipment volume it can grow by 100% in the coming years. Currently, this amounts to three million containers a year, but we anticipate this to rise to six million and we intend to capture at least 50% of this market.
The ports represent the lifeblood of the Djibouti economy; can you outline the expansion projects that are being undertaken at the moment? We are currently investing $4.4bn in our development projects, including expanding the capacity of our current ports and the airport extension programme. We have extensive experience in running ports successfully, both for oil and containers. Indeed, our container port is one of the biggest in the world and certainly the biggest in Africa. We built these two ports very quickly, taking a total of 23 months from the start of the project to the first ship arriving at the port. We know how to build these ports: we have the right partners, and we also know what to look for in the selection of contractors to build our infrastructure. The DPFZA is heavily dependent upon external economies and other factors for its success – short and long term. How does the DPFZA prepare itself for some of the challenges that may affect its foreign clientele, and in turn affect the income of the port itself? There are a lot of external factors that affect the profitability of the ports and our activities but to reduce external risks we are diversifying. We are not only working in partnership with Ethiopia, our main customer, but also working with South Sudan. That country’s foreign trade is now taking off and over the last few months’ transit traffic has been moving from Djibouti to South Sudan in increasing volumes. In addition to this we are also receiving transshipment traffic – that is, shipments for the other coastal states in the region, not just for landlocked countries. This traffic constitutes 55% of our revenue, transiting to Red Sea and Indian Ocean ports and even all the way down to Durban, South Africa.
The ports obviously have a linkage to other areas of Djibouti’s economy. Where do you see the synergies to further enhance the economy? There are many other areas of the economy that can benefit from our efficient ports. The basic business of the ports is in handling goods. We see huge opportunities for our clients to manufacture in the Free Zones that are being established and then re-export their goods. The ports are the only hub that can efficiently handle this flow of huge quantities of goods. Another key component of the DPFZA’s continued success is the stability of the country and the security of the services provided. In what ways are you ensuring that both these will be maintained for the future? The security and stability in our country is our main asset. We certainly have the security measures in place, and we also have very high productivity. In fact, that level of productivity is world-class, unmatched even outside Africa. Our cranes are currently han-
“WE CAN REACH THE OTHER EAST AFRICAN LANDLOCKED COUNTRIES AND THE HEART OF THE CONTINENT WHERE MUCH OF AFRICA’S RESOURCES ARE LOCATED.”
58 New African Magazine June 2012
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PORTS
dling 34 containers an hour. This represents a highly efficient service that reduces the turnaround time for ships. This productivity would not be possible without our staff. We have also sent 120 of our most gifted students to a maritime academy in India. They will become the future managers of the three ports we currently operate and the five others we are planning. There are of course other related marine businesses that require qualified personnel, and this annual training programme represents an investment in our future. Where do you see the potential for growth and partner projects for the DPFZA? We expect trade growth beyond South Sudan. We can reach the other East African landlocked countries and the heart of the continent where much of Africa’s resources are located. These cannot be capitalised upon without the port, rail and road connections. As development and peace come to the region, we will capitalise from the increased movement of traffic. In addition, competition between ports is not only based on the tariffs. Some ports may be cheaper in terms of their tariffs but when you look at their productivity, clients will choose Djibouti, because the cost
Above: The Port of Djibouti’s productivity is world-class, and trans-shipment volumes are forecast to grow at a breakneck pace
of other ports’ inefficiency is higher. Another measure that would be hugely positive to ourselves and our partners in East Africa would be the creation of a customs treaty or agreement. That would greatly enhance harmonisation and the movement of goods. We currently have a customs agreement between Ethiopia and Djibouti, a system of single documentation, and that has proved very successful. Do you have a personal vision for the ports and what the next five years hold? Well for our ports and transportation, we see this development as demand-driven. When there is a trade there is a need for ports and transportation. But a port cannot work in isolation, without the rail and road connections reaching deep into the heart of the continent and perhaps even extending from the Red Sea to the Atlantic. At the moment we cannot cross the continent and we must transport goods around Africa which is vastly more expensive. So the future ports we are going to make will be integral to Africa’s future growth and inter-trade development, to connect the one billion African population. This is where we need to have vision and commitment. n
June 2012 New African Magazine 59
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PO BOX 197 Venise Rd, Djibouti Free Zone Tel: +253 21 35 90 70 Fax: +253 21 35 90 59 www.djibouti-portsfz.dj
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Djibouti Special
National Investment Promotion Agency (NIPA), Djibouti
Mahdi Darar Obsieh – Director General
Facilitating Djibouti’s FDI flows Mahdi Darar Obsieh (pictured below), Director General of Djibouti’s National Investment Promotion Agency (NIPA), has the primary responsibility for facilitating the flow of foreign direct investment into the country. He explains to New African just how this is being achieved.
Are there any specific sectors that you have been focused on? The main areas that we have been responsible for assisting and promoting are the tourism, transport and logistics, fishing, energy as well as telecommunications and finance sectors. Eighty per cent of Djibouti’s GDP is based on services and the above-mentioned sectors are highly promising. Most of those sectors are still unexploited and our country welcomes all kinds of investments.
Please could you provide a short history and an overview of NIPA’s activities? NIPA has been incorporated in Djibouti since 2001 and is the agency that the government put in place to facilitate inward investment to the country. It provides full advice and support for new or existing local and foreign donors coupled with supportive training for investors and companies alike. We also advise on legal and governmental issues relating to the establishment of companies and land acquisitions for investors. The appropriate information on the business environment, regulation and laws are given and NIPA advocates on behalf of investors for the improvement and facilitation of investment procedures. Beyond advisory services, how do you assist overseas companies to enter the Djibouti market? The NIPA is a strong partner and representative of the private sector at governmental level. One way that our agency helps the international investor is in seeking to identify areas and investment projects where publicprivate partnerships are appropriate, providing links with companies that can act as local partners to foreign enterprises. Our agency also offers the incentives and benefits provided by the Investment Code to local and overseas companies. Foreign investors should see Djibouti as the main gateway to the COMESA market of approximately 340 million consumers. Have you headed NIPA from the outset? No. Although established in 2001, the office has only been here since 2003, and I have been the Director General for the last four years. Since then we have been improving our services to benefit private operators. One of the key attractions to investors that encourages them to make use of our services is that most of them, unlike in many other countries, are completely free. Our primary function is to aid the private sector and to help them improve their capacities.
You have clearly been very successful at securing increasing levels of FDI. What do you ascribe this to? One particular achievement we are proud of is our onestop shop that allows our client-investors to access a harmonised service. The one-stop investment office has now been open for over two years and has proved to be a great component of our services. The NIPA in partnership with different state representatives has also proactively promoted the Republic of Djibouti’s investment opportunities and business environment at international level.n What makes Djibouti such an outstanding investment destination? There are, as we always say, 10 prime reasons to choose to invest in Djibouti. They are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
The country is strategically positioned in the region and is located on one of the world’s busiest shipping lines. Djibouti has always been a land of exchange and encounters and enjoys a high level of political stability. Nationals and foreigners alike enjoy the same benefits. The national currency is pegged to the US dollar and is freely convertible. The financial system is free of exchange controls; it allows totally free currency transfers. The country is supported by renowned financial institutions. Large-scale infrastructure projects are already in progress. The telecoms system ranks among the best in Africa. Djibouti is the main corridor in the region, because of its port infrastructure. Djibouti is a gateway to the East African market of over 400 million consumers.
62 New African Magazine June 2012
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Djibouti
The new investment hub of East Africa
NIPA National Investment Promotion Agency
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