Djibouti:Africa’s Singapore is slowly taking shape

July 25, 2017

Djibouti is poised to transform itself if it takes advantage of this current moment of infrastructure and investment boom By Bashir Goth | Special to Gulf News 17:00 July 22, 2017

By Bashir Goth | Special to Gulf News

Djibouti does not frequently feature in the headlines, but the leader of the tiny country in the Horn of Africa and his international partners recently touted this state of rock mountains, and extremely hot weather as the new Dubai, the Shekou of East Africa, and the rising African Singapore.

If it sounds difficult to imagine such a glowing future for a country which the Associated Press once dismissed as a place devoid of resources “except for sand, salt, and 20,000 camels”, think for a moment of the state of the Arabian Gulf metropolises in the early 60s which would in a mere 30 years transform from impoverished pearling villages into Arabian Manhattans. Djibouti is poised to transform in much the same way in a fraction of the time, if it takes advantage of this moment of opportunity.

Djibouti counts on its vital strategic location for global trade and regional geopolitics to propel its development.

When Djibouti gained its independence forty years ago, nothing promised a great future for the microstate. If anything, it was at risk of being swallowed up by one of its two powerful neighbors as predicted by the New York Times at the time. In a dispatch from the city one month before independence the NYT wrote: “Because these two feuding countries had been moving in to exert control over the territory and because it is so impoverished that it cannot stand on its own, many feared that that its independence would be a flashpoint for a major war on the so‐called horn of Africa.”

Ethiopia relied on Djibouti port as its economic lifeline and Somalia had a historical claim on Djibouti as being part of a pre-colonial Somali territory. An imminent clash between the two countries in 1977 was averted by Djibouti’s decision to stay away from an anticipated and much touted union with Somalia. Although Djibouti remained mainly peaceful with the exception of a short-lived insurgency of the Afar people, the second largest ethnicity in the country after the Somalis, the country had to wait for the end of the Cold War to reap the benefits of its strategic location.

Consumed by internal strife and superpower rivalry during the Cold War, Ethiopia and Somalia went through devastating civil wars which finally ended the strongmen regimes in both countries. In fact, Djibouti, originally a bone of contention between her neighbors, later became the place where both poor refugees running away from conflict and rich businessmen seeking a safe haven for their money took refuge.

But the moment that chaos gripped Somalia and led to the rise of extremism and piracy in the Indian Ocean, which accounts for 70 percent of the total traffic of petroleum products and 50 per cent of world’s container traffic, Djibouti struck gold for its location. Moreover, with a global loss of about $7 billion (Dh25.74 billion) at the height of piracy in 2011, the location of Djibouti has become as precious a resource as a new oil find. Marine forces of industrial and post-industrial countries flocked to Djibouti to base their anti-piracy operations there.

As an American journalist once said, Djibouti’s importance boils down to three things: “Location, location, location.” Due to its proximity to hot conflict zones in Africa and the Middle East including Somalia, Sudan, Yemen, Syria, and Iraq, Djibouti is one of the few countries poised to reap the benefits of such a dangerous neighborhood.

Apart from the French Foreign Legion that has been based there since independence, the United States established its largest military base in Africa in Djibouti’s Camp Lemonnier in 2002. This was soon followed by major powers who secured their presence in Djibouti with China building its first overseas military base there which opened this year.

Boosting Country’s Infrastructure

But apart from the windfall in rent from these new bases, Djibouti’s real economic breakthrough came in 2006, when DP World gained a concession to develop and operate the Doraleh Container Terminal (DCT), leading into the opening of DCT in December 15th, 2008 as one of the most technologically advanced container terminals on the African continent.

Capitalizing on its location, Djibouti earmarked billions of dollars for infrastructural investment over the next five years, according to Djibouti Vision 2035. The plan includes the construction of a chain of ports and free zones in an agreement with China. Kick-starting the development spree was the inauguration of several ports including the completion of the first phase of the ultra modern Doraleh Multipurpose Port built by the Hong Kong based China Merchant Group (CMG), a partner of Djibouti Port SA.

Talking to China Daily, CMG president Li Xiaopeng said: “Making full use of Djibouti’s geographical advantages, we are in the process of making the country the ‘Shekou of East Africa’. He said they would put their model in Shekou, known as “Port-Park-City, into practice in Djibouti. A sprawling development project of a business district with commercial and tourism facilities is also expected to be completed by 2021 at the location of the old port.

Among Djibouti’s most ambitious projects are a number of railways that started with the opening of the Chinese built railway track, the first electric transnational railway in Africa, linking Addis Ababa to the port of Djibouti. The importance of the 752Km railway lies in the fact that Ethiopia, the most populous landlocked country in Africa and the fastest growing economy in the world according to World Economic Prospect Report 2017, imports more than 90 per cent of its trade through Djibouti which accounts for 70 per cent of Djibouti ports’ overall operations.

Another Chinese financed Ethio-Djibouti project is the Damerjog Hydrocarbon infrastructure, due to be completed next year, which will include an LNG Terminal that will export gas from Ethiopia’s Ogaden region primarily to China via Djibouti. Also in the design is another 550Km long pipeline planned to transport refined diesel and gasoline fuel from Djibouti’s to central Ethiopia, while another 1,600Km pipeline is planned to transport crude oil from Southern Sudan’s Melut basin to Djibouti.

The most ambitious project underway is a 8,715 km trans-African highway linking Dakar (Senegal) to Djibouti (Djibouti) and will traverse 10 West, Central and East African countries when it is completed in 2022. Djibouti will also have two more major airports to be completed by 2019.

The boom’s economic and political pitfalls

Despite the investment boom and the country’s growth rate considered one of the highest in Africa, the International Monetary Fund (IMF), cites that 41 percent of the population of Djibouti is still poor and 23 percent live in extreme poverty, while the unemployment rate stands at 39 per cent according to the IMF and African Development Bank.

“The authorities should advance rapidly in critical reforms aimed at translating investments into strong, inclusive, and job-creating growth”, said a statement by the IMFs mission chief for Djibouti.

Both Institutions also cautioned Djibouti authorities that the country is at a high risk of over-indebtedness due to most of the infrastructure investments are financed externally. The government, however, argues that the objective of vision 2035 is to bring economic transformation to offset the debt crisis.

On the political front, President Ismail Omar Guelleh who came to power in 1999 has won every election since then after amending the constitution to run more than two times. Opposition figures accuse him of denying a level playing field for his opponents and silencing dissent voices. Even the American Foreign Policy magazine branded Djibouti as “A friendly little dictatorship in the Horn of Africa.”

Given the President’s vision of ambitious and speedy infrastructural development, one wonders if he will join the club of similar benevolent authoritarians who led their countries to modernity and prosperity. But that is a consideration for historians and the passing of time. From the current vantage point Djibouti enjoys a wealth of opportunities and the door to prosperity lies wide open. The moment waits to be seized.