Aside from some limited natural resources, Djibouti’s economy is largely dependent on trade. The country is strategically located in East Africa and serves as the regional transportation and logistics hub for landlocked countries in the region. It also enjoys political stability and security from hosting French and US military bases. Djibouti encourages foreign investment by ensuring 100% foreign ownership in the private sector. In addition, the national currency is pegged to the US dollar in order to keep the economy integrated with international markets. The country attracted $286 million in FDI in 2013, bringing its total FDI to $1.3 billion.
Transport & Logistics
The sector is a major contributor to the country’s GDP owing to its port facilities. Doraleh Terminal was built by the DP World. The Tadjourah and Ghoubet ports are still under construction and will be completed in a short time. In addition, the government plans to increase the number of ports by separating them into specific functions and build new railway lines to serve them, a network which will include new oil refineries, livestock terminals, potash and salt exporting facilities.
Djibouti’s telecom sector represents an untouched domestic market with various products including mobile services, fixed lines and broadband, where the state-owned Djibouti Telecom has the monopoly. GDP contribution is still low, therefore, competition is required. However, the country has potential to become the regional hub for telecommunications by providing an international network with undersea fiber optic cable systems.
Djibouti’s banking sector is competitive and hosts 11 banking groups in total. Recently, it has achieved significant growth by providing an excellent macroeconomic framework for investors and now accounts for 10% of GDP. There are no restrictions except for the minimum capital requirement of $1.7 million to establish a financial institution. However, Djibouti lacks other financial services, including leasing and insurance companies, investment funds and microcredit organizations. In addition, Islamic finance is a growing trend and there are already four Islamic banks operating in Djibouti.
Djibouti does not have any oil or natural gas reserves and imports what it needs, but it has considerable potential energy resources, including wind, solar and geothermal energy. However, the country, like others in the region, lacks production capacity. Energy development is one of the crucial aspects of Djibouti’s future plans and the government encourages the private sector to invest in energy development by promoting a supportive business climate. In addition, the country is aiming to have 100% of its energy come from renewable sources by 2020.
Djibouti’s Lake Assal is one of the largest saline lakes in the world and is ideal for salt production. In 2008, Emerging Capital Partners (ECP), in an agreement with two other interests, began further developing the facilities for harvesting salt from the lake, with an initial investment of $30 million in Salt Investment. The government is open to new investors, who it is hoped would improve salt production and thus increase its export volume.
Djibouti offers various tourism opportunities, most of which have not yet been used to their full potential due to a lack of tourism facilities. There are already 23 hotels, but only two of these are of a high standard. In addition, these hotels are all located in the capital city. The National Investment Promotion Agency (NIPA) works to highlight to investors and companies other areas in the country where hotels and resorts could be built. Its targets include Maskali and Moucha Islands, Goubet, Lake Abbe and Lake Assal. Ecotourism is a growing trend in Djibouti with some small amount of competition, which is driven by the government. In addition, the Gulf of Tadjourah and Seven Brothers Islands are ideal places for scuba diving and sea safari trips.
Djibouti has only one international airport, in Ambouli, just outside the capital city. With more than 11 major international airlines having regular flights to Djibouti, the country has the opportunity to become an air transport hub for connecting flights. Air transport has been identified as an area for expansion, with a number of investment opportunities coming, including extending the current capacity and constructing a new international airport with an estimated investment value of $360 million for the next decade.