Djibouti

Djibouti port

Foreign Investment Overview

  • FDI inflow, 2017: USD 165M
  • Djibouti’s largest investors between 2003 and 2015 are The United Arab Emirates, Kuwait, Qatar, and the United States, who have contributed 40%, 21%, 21%, and 7% to Greenfield investments respectively.
  • In 2016, Djibouti received four Greenfield investments with total deals coming to USD 235M.
  • There has been no cross-border merger or acquisition activity reported since 2014.
  • Between 2003 and 2015, business and financial services attracted USD 3B into Djibouti’s economy.

Composition of Djibouti’s GDP and FDI

  • The country’s strategic geographical location is its most attractive investment feature – on a coast where the Far East, Persian Gulf, Africa and Europe are at crossroads.
  • It is easy for investors to do business with Djibouti; the government is efficient with high levels of transparency and accountability.
  • Djibouti’s currency is stable, freely convertible, and pegged to the US dollar.
  • The government offers significant tax reductions to foreign investors.
  • Djibouti has launched free economic zones, aimed at incentivizing industrial development.
  • Public investments are targeted at energy, transport (ports and railways), and water services to boost business activities in the country.
  • There are strong regional links between Djibouti and Ethiopia, as seen by the development of a 550km oil pipeline and construction of a train to connect Ethiopia to its main port.  

Sectoral View

  • Djibouti’s government wants to leverage its strategic location and deep-water harbor to become the logistics and commercial hub for East Africa.
  • The service sector is the largest contributor to Djibouti’s GDP, fueled by public and private investment into transport and energy infrastructure. A gas pipeline is currently being built between Djibouti and Ethiopia, due for completion in 2019.
  • Djibouti’s industry is driven by the construction and energy sectors, buoyed by public investments. Mining and manufacturing have a low contribution to GDP.
  • Djibouti’s agricultural sector contributes 3% to GDP, but the government has been able to attract grant financing to develop fishing, livestock and horticulture.

Recent Developments

  • The country has announced a series of infrastructure developments, including improving drinking water, building airports, a wind farm, a solar power plant, and a geothermal power plant, with the support of foreign investors.
  • China has contributed USD 200M to construct the Obock International Airport, which will improve the country’s business environment.
  • China recently opened its first military base on the African continent in Djibouti, adding to the existing military bases in the country – US, UK, France and Japan (its only base outside Japan). Saudi Arabia is currently building a base there as well. Now that Eritrea has opened its borders to Ethiopia, Djibouti is no longer Ethiopia’s sole port and may suffer economically as a consequence.

South Korean Alignment

  • South Korea has deep expertise in metals, machinery and textiles; and these are three of the sectors that Djibouti may develop into next, according to their product space map

Contact us to learn more about investing in the Horn of Africa.

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