Dreams Of An “African Singapore” – When Eritrea separated from Ethiopia in 1995, it was not welcomed by many Ethiopians. To be honest the eventual consequence of the decision which was poised to leave Ethiopia landlocked was one of the biggest factors behind Ethiopia’s anxiety. Fearing the Country will become dependent on another nation’s port for its foreign trade the referendum that sealed the fate of the now 27-year old Eritrea quickly increased the vulnerability of the rest of Ethiopia which was just emerging from decade’s long civil war. Things seem to have gotten from bad to worse when the separation was soon followed by one of the most devastating border conflicts at the time: Ethio-Eritrea border war.
Though the war appeared to be a double-edged sword for Ethiopia, which was then a population of not more than 60 million and completely cut off from its traditional access to the seas, the bloody Ethio-Eritrean war has otherwise offered unexpected blessing to Djibouti, a small nation in the corner of the Horn of Africa with population less than half a million.
Consequently, over the course two decades that followed, Djibouti took on the role of providing the only gateway to Ethiopia’s import and export. This enabled Djibouti to make some monumental strides in its port development in the most strategic geopolitical location.
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Located on the mouth of the Red Sea and Suez Canal, today the Republic of Djibouti is the third smallest nation in Africa with a population, according to official figures, of around 800 million, almost 100 folds less than its neighbor Ethiopia. Despite its location – which is situated in the most volatile region of the Horn of Africa – Djibouti is one of the most stable countries in the sub-region or of the entire Eastern Africa block. There are no known Islamic radicals in Djibouti and, unlike its immediate neighbor Somalia or Yemen, across the Bab el-Mandeb Strait; it is not plagued by no vicious civil war either in spite of being emblematic to the Horn.
As most small countries with limited resources, many of which have been known to specialize in something like financial services; and become a safe haven to global corporations and shell companies, Djibouti as well was poised to tap into its strategic location with access to one of busiest trade routes in the world.
Hence, Djibouti has found its own way to thrive by hosting military bases on its strategic shores.
Its seaside advantage and geographical location helped the country play host to the world’s superpowers and their respective army and naval units. Its old colonial administrator France maintains a heavy presence there; as do the Americans, Italians and Japanese and lately China. Germany and Spain as well maintain troops at the French base, with the Chinese becoming the latest power to settle in Djibouti.
The Chinese base maintained by the People’s Liberation Army Navy is now located at Doraleh, west of the capital Djibouti, while all the other nations’ are situated near the international airport less than ten kilometers to the south.
Predictably, over the past 20 plus years, Ethiopia’s dependency on Djibouti’s port services has contributed hugely to present day Djiboutian socio-economic situation; and inversely, Djibouti contributing to Ethiopia’s developmental and economic activities.
Hence, the two countries have had strong relationships, tied with trade, investment socio-economic relations as well as common strategic and security agreements.
The two countries enjoy a long history of bilateral and diplomatic relations. For instance, they have been interconnected with a railway that was first built in the early 1900s linking them for more than a century.
With the never-ending hostility with Eritrea, the two countries relation only grew stronger and tighter, with Djibouti being viewed as the closest and most important neighbor to Ethiopia; partly attributing the relationship to the impressive economic growth Ethiopia has registered over the past 15 years.
Since Djibouti handles roughly 95 percent of all inbound trade for landlocked Ethiopia; Ethiopia’s economic growth and its import-export performance directly brings positive impacts on Djibouti’s economy.
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According to officials of the two countries, Djibouti bags at least USD one billion from Ethiopia for port-related services every year.
Diversifying the Economy
The Djiboutian government and its partners like the trade chamber have exerted their efforts to boost the economy by attracting foreigners with its strategic geographical location including superpowers. Geopolitics is a lucrative business for Djibouti. The US pays USD 63 million annually in rent for its base, the French fork-out USD 36 million, and China expands USD 20 million and Italy USD 2.6 million.
These days, Djibouti looks more investment hungrier nation, desperately wanting to attract more foreign investors by offering investment incentives and advantages. One of the major offers to investors includes ID free industrial zones.
In order to foster new partnerships and conjure more foreign investors, the Djibouti Chamber of commerce has organized a ten-day International Trade Fair–An event which took place from 3rd to 10th of December 2018. It has been held for the second time and was able to attract around 310 foreign companies.
Explaining the main intentions of the trade fair, Youssouf Moussa Dawaleh, president of the Chamber of Commerce of Djibouti said that, “It will be an opportunity to gather all economic operators, wishing to invest in Djibouti or in this part of the continent.”
“During the event, a wide range of services will be offered to companies ranging from exhibition booths for products and services pertaining to the strategic advantage of Djibouti, for instance, in terms of the Ports or the Free Zone,” he said a day before the opening of Djibouti’s second edition of the International Trade fair.
According to the Chambers president, the event highlights the future of sustainable trade and investment cooperation in the Horn of Africa. This was also reiterated by the country’s President—Ismail Omar Guelleh.
Speaking at the opening of the event, Djiboutian President expressed his government’s commitment to create conducive environment for regional and global cooperation.
“My government has taken several measures including improving policy framework, establishing free trade zones, and port developments that would help create conducive trade and investment environment in the country,” he said.
The officials also said that the fair will focus on boosting comprehensive regional cooperation to promote trade and investment among countries and to make the country a major tourist destination.
Besides business and tourism, world military powers, are increasingly drown to military bases in Djibouti due to its strategic location.
As part of the preparation and facilitation of services that magnetizes investments, the Djibouti government has also intensified infrastructure developments by financing a multibillion-dollar project. Among others, the likes of transport infrastructures and building and modernizing its port facilities could be visibly identified.
For instance, It is to be remembered that the new Doraleh Multi-purpose Port of Djibouti, began its operation a year ago announcing up to a 45 percent discount for freight forwarders who process the shipment of goods from and to Ethiopia.
As announced last week by the same officials, the Ethio-Djibouti electric railway will start transporting containerized goods from next month onwards with the turn of the month ushering-in a new year.
Speaking at a press conference organized for visiting Ethiopian journalists [on December 4th] the CEO of Société de Gestion du Terminal a continuer de Doraleh (SGTD)Abdillahi Adaweh Sigad said that the railway is expected to transport at least 200 containers daily within 20 days.
“We are going to deploy two cargo trains within three weeks and each cargo has the capacity of transporting 100 containers per day,” Sigad told the press at his office situated on the banks of the seaport.
For many years, failure by importers to collect their goods on time, a shortage of transportation trucks as well as mismanagement of containers has congested the Port of Djibouti; costing Ethiopia hugely forcing subsequent measures to introduce dry ports facilities such as Modjo Dry Port to alleviate the problem.
Even though at time overwhelming, the port, which is managed by SGTD, is still delivering to Ethiopia. Nevertheless, Djibouti’s government has now focused on the expansion of its port services to boost the economy and take a leading role in the region’s trade and logistics activities.
According to port officials, they are planning to expand their port services for other landlocked countries in the region mainly to South Sudan, Rwanda, and Burundi.
It is to be recalled that SGTD took over the administration of the port from DP World.
DP World previously managed the Doraleh Container Terminal with a minority share. But the Dubai based firm and the Government of Djibouti interned into a disagreement resulting in the unexpected cancellation of the contract.
DP World consequently took the Djibouti government to the London Court of International Arbitration, which ruled last August that the contract was valid and binding.
Despite the dispute with DP, which remains unsolved as of yet, the Djiboutian government is confident that the fast progress in Ethio-Djibouti ties, the commencement of its modern port facility as well as the recently inaugurated industrial facility [Free Zone Authority (DPFZA)] will soon realize the effort to achieve Economic Integration in Horn.
For decades, trade with Ethiopia’s land-locked but fast-growing economy has been conducted through Djibouti’s ports. But a peace deal between Ethiopia and Eritrea, concluded in July this year reopened the trade route through the Eritrean port of Massawa, once the most bustling port on the Red Sea.
If and when that happens, analysts say Djibouti stands to lose much of the USD one billion it earns annually from exports and imports passing through its ports.
The CEO of Djibouti’s new Doraleh Multi-purpose Port, nevertheless, disagrees. “Djibouti wants to be a preferred port of entry for Ethiopia on basis of its good service,” he responded to The Reporters queries.
He downplayed any fear regarding the possible partial shift of Ethiopia to Eritrean ports. According to him, these developments would not be viewed as a threat for Djibouti – the bulk of whose income is generated from its port services.
“It is not a risk; we see it as an opportunity,” Wahib Daher Aden, CEO of Djibouti’s new Doraleh Multi-purpose Port said while reacting to the questions. He further pointed out that his country would rather focus on exerting its capacity to be more competent and more efficient service provider with its flagship project –Doraleh Port – which is equipped with a state of the art infrastructure including four giant cranes.
“We want to be selected for our services,” he said adding, “The new Port was be able to handle 5 million tons during 2018,” a performance he described as “very good for a starting year.” We can now manage cargo more safely and cheaply,” he said.
Two nations, single destination
Djibouti’s ambition of economic expansion and regional economic integration is not limited only to infrastructure development. They are also looking for alternative means to diversify the economy to the Tourism Sector which has not been developed well until now.
According to the National Tourism Office of Djibouti, following the commencement of Ethio-Djibouti railway transport, and the growing number of middle-class Ethiopians; the country is targeting its neighbor to the west both to boost tourism flow and market the two nations as a single tourist destination.
“We have seen a steady increase of tourists from Ethiopia over the past two years. But that is not enough. We are working to increase the number of tourists from Ethiopia. We will open our office in Addis Ababa next month to provide information about the tourist attractions of Djibouti to Ethiopians,” said Osman Abdi Mohamed, CEO of National Tourism Office of Djibouti.
Similarly, Dawaleh also supports the Head of the tourism office’s assertion.
“Since the railway between the two countries has started operations, it makes it easy and affordable for Ethiopians to spend their holidays with families enjoying the Red Sea coasts in Djibouti, “according to Djiboutian Chamber president.
Ethiopia and Djibouti are connected via road, railway, and electricity. Ethiopia has also been providing water to Djibouti over the past few years. Further binding them together, the two countries have also signed an agreement in 2016 which will enable Djiboutian to be treated like Ethiopians and vice versa, according to Dawaleh.
One of the challenges to boost the number of Ethiopians visiting Djibouti for leisure would be the shortage of hard currency in Ethiopia. Reports show that discussions are underway between the officials of the two countries about the possibility of Ethiopians using their own currency while in Djibouti.
Though not officially promoted by the government, it is not a problem to find black market vendors on the streets of Djibouti, who convert Ethiopian birr to Djibouti Frank, although it is forbidden to take out more than 4000 birrs out of Ethiopia.
According to the directive of the National Bank of Ethiopia, the maximum amount one can hold coming into Ethiopia or leaving Ethiopia to other countries except Djibouti is 1,000 birr.
Recently, Djibouti has introduced online visa for all citizens of the world. The country has also made available visa on arrival for many countries, according to Osman.
The two governments are also working to market their two countries as a single tourist destination, Osman said citing, tour operators from Ethiopia that met with their counterparts in Djibouti last year, whereby they had discussions on how to do joint marketing of the country’s tourist attraction in as a package. He also indicated that a similar meeting is expected in the coming months in Addis Ababa.
“Ethiopia has many historical tourist attractions registered by UNESCO. But Djibouti has what Ethiopia does not have, such as seaside beaches and diving attractions. Tourists who go to Ethiopia can go to Djibouti to visit such areas. Likewise, tourists who come to Djibouti can also go to Ethiopia to see what is not available in Djibouti if we prepare a one package tour,” he said.
Around 140,000 tourists have visited Djibouti in 2017 alone. However, tourism has contributed only to 3 percent of the country’s gross domestic products (GDP). The CEO said adding, “We are now planning to boost this share to five percent in the coming years.”
While aiming boosting its infant tourism sector, the Djiboutian government also called on Ethiopian investors to engage in opportunities in Djibouti, especially on tourism and hospitality sectors.
Some Ethiopians have already engaged in investment in Djibouti. One of them is Tadios Tafesse, who has recently built his brand resort – Kuriftu Resort and Spa at the Coast of Djibouti.
Kuriftu Resort and Spa – which currently owns and runs 11 resorts in different parts of Ethiopia – has spent an investment of over USD two million to build its first resort outside of Ethiopia, otherwise known as, Kuriftu Resort in Moucha Island of Djibouti.
Built on 2,000 square meters, the resort was inaugurated in a grand ceremony last week.
A day earlier in the opening of the resort, its owner Tadios highlighted that his overseas resort will help strengthen the existing Ethio-Djibouti relationship in tourism development in addition to trade and investments.
The restaurant, located in the historic Gheralta region and the white sandy beaches of the famous Moucha Island, can accommodate up to 400 people sitting and up to 1,000 people for cocktail receptions.
In addition to the newly inaugurated resort, Tadios said that he is also building a second project in the same place – situated on a small coral island off the coast of Djibouti across the Red Sea.
According to Him, the second project will be built with a total investment cost of some USD Seven million and is expected to be the premier island destination for travelers from the African mainland.
With its ambitious plan to transform Djibouti as a hub of trade and investment in Eastern Africa, Djibouti opens its door wider for foreign investors who would follow the footsteps of the likes of Kuriftu Resort and Spa.
No matter what tomorrow brings for Djibouti and Djiboutian, the Country’s Chamber of Commerce looks more confident about the future; and that its country will soon be referred to as “Africa’s Singapore”.
A fitting ambition really, “Africa’s Singapore”, given Singapore’s economic triumph starting as a small finishing village with no dependable natural resources in the early 1960s. Rather ironically, becoming Africa’s Singapore was also the same ambition expressed by Eritrea upon gaining its independence some three decades ago.