Bureau of Economic and Business Affairs
July 5, 2016

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Executive SummaryShare    

Djibouti, a country with few resources, recognizes the crucial need for foreign investment to stimulate economic development. The country’s assets include a strategic geographic location, Free Zones, an open trade regime, and a stable currency. Djibouti has identified a number of priority sectors for investment, including transport/logistics, financial services, energy, and tourism. Djibouti’s investment climate has improved in recent years, which has led to a renewed interest by U.S. and other foreign firms. There are, however, a number of reforms still needed to further promote investment.

The IMF has projected GDP growth at or above 6% annually for the next several years. In the nineties, Djibouti’s economy was weakened by an influx of refugees, a persistent drought, a four-year civil war, and a substantial decrease of foreign aid. Recent years have seen a significant improvement driven by intensive expansion of the ports, changes in the tax and labor codes, and an influx of foreign direct investment (totaling 9.1% of Djibouti’s GDP in 2014). Real GDP growth has remained between 4% and 6% per year for the last five years, and inflation has remained below 8%.

Djibouti remains below regional and world averages in World Bank’s “Doing Business” reports, and fell from from 169 in 2015 to 171 (of 189 countries) in the 2016 ranking. Some noteworthy improvements include making it easier to start a business by simplifying registration formalities and eliminating the minimum capital requirement for limited liability companies. In addition, Djibouti adopted a new commercial code, which broadens the range of movable assets that can be used as collateral to obtain credit.

Several large infrastructure projects are currently underway, with others in various stages of negotiation. Many of the ongoing and future projects are Chinese-funded with tied loans. An Independent Power Production law promulgated in 2015 has led to a surge of interest from U.S. and foreign firms, with multiple ongoing negotiations for energy generation projects, including green and hydrocarbon technologies.

The business environment in Djibouti would benefit from significant reforms to its legal and regulatory framework. Needed reforms include simplifying the tax code, especially for small businesses, and streamlining the procedures for investment. In addition, the adoption of a new investment code based on international best practices is necessary as indicated by UNCTAD in its investment policy review of Djibouti (

Economic development is hindered by high electricity costs, high unemployment, an unskilled workforce, regional instability, and a need to diversify the economy.

Djibouti belongs to a number of regional organizations, including the Inter-Governmental Authority on Development (IGAD) and the Common Market for Eastern and Southern Africa (COMESA), which groups 19 countries into a common market of more than 300 million people. Djibouti is eligible to benefit from the African Growth and Opportunity Act (AGOA), and is also a member of the World Trade Organization (WTO). In addition, Djibouti is among the 34 least developed African countries with the option of entering the European Union Generalized System of Preferences.

Table 1



Index or Rank

Website Address

TI Corruption Perceptions index


99 of 167

World Bank’s Doing Business Report “Ease of Doing Business”


171 of 189

Global Innovation Index



U.S. FDI in partner country ($M USD, stock positions)



BEA/Host government

World Bank GNI per capita


USD amount

Millennium Challenge Corporation Country Scorecard

The Millennium Challenge Corporation, a U.S. Government entity charged with delivering development grants to countries that have demonstrated a commitment to reform, produced scorecards for countries with a per capita gross national income (GNI) of $4,125 or less. A list of countries/economies with MCC scorecards and links to those scorecards is available here: Details on each of the MCC’s indicators and a guide to reading the scorecards are available here:

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Attitude toward Foreign Direct Investment

Djibouti’s laws encourage foreign investment, with state-run media providing favorable coverage of projects funded by foreign entities. The government sees FDI as a driving force behind Djibouti’s economic growth. Faced with high unemployment rates of over fifty percent, FDI is expected to generate jobs.

There is no screening of investment or other discriminatory mechanisms. Navigating the bureaucracy, however, can be complicated. Certain sectors - most notably public utilities - are state-owned and are not open to investors. In July 2015, the Djiboutian government approved a bill liberalizing the production of electricity. The state-owned company Djibouti Electricity (EDD) has had a monopoly on electricity production for decades. The bill will begin the process of opening the sector to competition, though this will likely be slow, and EDD retains all rights to the transmission and distribution of electricity. Nonetheless, the liberalization of production is a positive step in promoting private investment in the energy sector.

Djibouti's National Investment Promotion Agency (NIPA), created in 2001 under the Ministry of Finance, promotes private-sector investment, facilitates investment operations, and works to modernize the country's regulatory framework. NIPA assists foreign and domestic investors by disseminating information and streamlining administrative procedures. To simplify the process, Djibouti seeks to use the main post office as a one-stop-shop where new business owners can register their company with all the appropriate government agencies. The construction of the facility is in progress and will house several services, including immigration and social insurance. The NIPA will be the main coordinator of the one-stop-shop which is expected to become fully operational in a few months. NIPA has identified several priority sectors for investment, including infrastructure and renewable energy.

A new Convention was signed in February 2016 making formerly temporary contracts between workers and labor brokers into fixed term contracts. These fixed term contracts will allow the workers to enjoy social security benefits, additional job security and the ability to borrow money from banks like other regular workers. Most foreign investors use local brokers for their staffing.

Other Investment Policy Reviews

World Trade Organization (WTO) completed a Trade Policy Review in October 2014.

The United Nations Committee on Trade and Development also conducted an Investment Policy Review in 2013. (

In June 2014, the World Bank started a project to “support the government of Djibouti’s efforts to attract foreign investment and improve the local business climate in strengthening mechanisms to address commercial disputes easing access to finance, and expanding the capacity of the NIPA for project management and implementation.” ( a World Trade Organization (WTO) member, Djibouti had its second review on trade policies and practices in 2014. The report found that manufacturing and agricultural sectors have remained weak, due to heavy taxation and the high costs of factors of production (labor and energy). Djibouti grants Most Favored Nation (MFN) status to its trading partners.


Laws/Regulations on Foreign Direct Investment

The country’s legal system has no discriminatory policy against foreign investment, and frequently negotiates extended tax breaks and other incentives to attract larger investments.

Djibouti has no foreign exchange restrictions. Businesses are free to repatriate profits. There are no limitations on converting or transferring funds, or on the inflow and outflow of cash. The Djibouti franc, which has been pegged to the U.S. dollar since 1949, is stable. The fixed exchange rate is 177.71 Djibouti francs to the dollar. Funds can be transferred by using banks or international money transfer companies such as Western Union, which are both monitored by the Central Bank.

The court system is not independent from executive power and most investors in the market counsel including an agreement to arbitration in a recognized international court.

Business Registration is the website of the National Investment Promotion Agency (NIPA). It has useful information and acts as a guide for investors.

The Djibouti Office of Industrial and Commercial Protection (ODPIC) is the agency in charge of registering businesses. Its website is and contains information about the registration process. Online registration is not possible; the normal registration process takes 14 days according to the World Bank. At a minimum, a company must register with the tax, social security offices, and the Chamber of Commerce. There is no regime allowing simplified business creation without a notary.

Enterprises which have an annual turnover of less than DF million 5 (USD 28,249) are defined as micro-sized enterprises (Decree 2013-121/PR/MHUE). The country economy does not have an official definition for small and medium sized enterprises.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors are not required by law to have a local partner except in the insurance industry, and there only if the company is registered as a local company and not a branch of an existing foreign company. Foreign and domestic private entities have equal rights in establishing and owning business enterprises and engaging in all forms of remunerative activity.

Screening of FDI

There is not an established screening process for FDI. FDI is encouraged and given favorable tax status. Specific terms are negotiated on a case-by-case basis. Many companies therefore have a unique status created by agreement with varying preferences and advantages.

Competition Law

In 2008, Djibouti adopted a new law on competition and consumer protection, which does not cover State-Owned Enterprises. Under this law, the GODJ regulates prices in areas where competition remains limited, for example; postal services, telecommunications, utilities and urban transport services are all regulated by the State. Djibouti does not have an agency that specifically promotes competition and does not have a comprehensive strategy to restrict market monopolies.

2. Conversion and Transfer PoliciesShare    

Foreign Exchange

Djibouti has no foreign exchange restrictions. Businesses are free to repatriate profits. There are no limitations on converting or transferring funds, or on the inflow and outflow of cash. The Djibouti franc, which has been pegged to the U.S. dollar since 1949, is stable. The fixed exchange rate is 177.71 Djibouti francs to the dollar. Funds can be transferred by using banks or international money transfer companies such as Western Union which are both monitored by the Central Bank

Remittance Policies

There are no recent changes or plans to change investment remittance policies. There are no time limitations on remittances. The government does not issue bonds on the open market, and cash-like instruments are not in common use in Djibouti, so direct currency transfers are the only practical method of remitting profits.

3. Expropriation and CompensationShare    

Foreign companies enjoy the same benefits as domestic companies under Djibouti’s Investment Code. Djibouti's Investment Code stipulates that "no partial or total, temporary or permanent expropriation will take place without equitable compensation for the damages suffered.” The Embassy is not aware of any recent act of expropriation of U.S. companies. However, there have been cases of foreign companies facing de facto expropriation via fines, while other companies have had their concession to run a public service unilaterally revoked.

4. Dispute SettlementShare    

Djibouti's legal system is based on French law, and consists of three courts: a Court of First Instance presided over by a single judge; a Court of Appeals, with three judges; and the Supreme Court. International lawyers practicing in Djibouti have reported effective application of maritime and other commercial laws, but there have been reports in the past from foreign companies operating in Djibouti that court deliberations were biased or delayed. Djibouti’s rule of law is weak as it relates to business disputes involving non-Djiboutians. Despite Djibouti’s participation as a member of the International Center for the Settlement of Investment Disputes, foreigners may still be pressured to resolve disputes in favor of Djiboutians.

In February 2014, the IGAD countries agreed to set up an international Business Arbitration Center in Djibouti. This institution would provide a mechanism for resolving business disputes, and may help to create a more transparent business environment in the region by reinforcing the principles of contract law and increasing the number of lawyers practicing commercial and contract law in Djibouti. A successful arbitration center could boost confidence among foreign investors. It is not expected to open until 2018 or later.


Djibouti does have bankruptcy laws, and bankruptcy is not criminalized. Insolvency laws are a high point in Djibouti’s investment climate, as it was ranked 68 out of 189 by the World Bank in 2016 in this area, compared to the 171 overall ranking.

Investment Disputes

Djibouti’s government has had only a few investment disputes in the past several years, none with U.S. businesses. In some cases, the disputes have been settled in international arbitration courts and the government has abided by those decisions. In other cases, there has been de facto expropriation through large fines. As in any country, a strong, enforceable contract is important.

International Arbitration

The IGAD, which consists of member states Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan and Uganda, seeks to establish an international arbitration center in Djibouti. The center will focus on handling business disputes within the region. It will provide alternative mechanisms for resolving business disputes. This may improve the investment environment and aid in gaining investor confidence in the region. Djibouti does not have a trade agreement with the United States at this time. It is eligible for AGOA.

ICSID Convention and New York Convention

Djibouti is not a member state to the International Centre for Settlement of Investment Disputes (ICSID convention). Djibouti is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention)

Duration of Dispute Resolution – Local Courts

According to the World Bank’s Doing Business rankings, dispute resolution involving local courts in Djibouti takes an average of 1,225 days and costs on average 34% of the claimed amount. Disputes resolved in local courts may be biased in favor of the local party. The court system is also limited by a lack of personnel and resources, which may contribute to the relatively slow and costly dispute resolution process.

5. Performance Requirements and Investment IncentivesShare    


Djibouti has been a member of the World Trade Organization since 1995. Post has no information concerning TRIMs.

Investment Incentives

Tax benefits and incentives fall under two categories detailed in the investment code. Investments greater than USD 280,000 that create a number of permanent jobs may be exempted from license and registration fees, property taxes, taxes on industrial and commercial profits, and taxes on the profits of corporate entities. Imported raw materials used in manufacturing are exempted from the internal consumption tax. These exemptions apply for up to a maximum of ten years after production commences. Incentives are often unique to an individual company or investment and are agreed upon with a single ministry. Projects can be delayed if all relevant ministries are not consulted during negotiations.

To promote exports, Djibouti has multiple free zones in which companies enjoy full exemption from direct and indirect taxes for a period of up to ten years.

Research and Development

Information not available.

Performance Requirements

Performance requirements are not a pre-condition for establishing, maintaining, or expanding foreign direct investments. Incentives do, however, increase with the size of the investment and the number of jobs created. Tax benefits and incentives fall under two categories detailed in the investment code. Investments greater than USD 280,000 that create a number of permanent jobs may be exempted from license and registration fees, property taxes, taxes on industrial and commercial profits, and taxes on the profits of corporate entities. Imported raw materials used in manufacturing are exempted from the internal consumption tax. These exemptions apply for up to a maximum of ten years after production commences. Investment matters fall under the jurisdiction of the national investment board, which approves all investments.

Foreign investors are not required by law to have a local partner except in the insurance industry, as noted above. Djibouti offers significant incentives to private-sector individual and corporate investors when establishing a company within its Free Zone. Establishing a local company outside the Free Zone is significantly more time-consuming. The Djiboutian investment code guarantees investors the right to freely import all goods, equipment, products, or material necessary for their investments; display products and services; determine and run marketing policy and production; choose customers and suppliers; and set prices. Foreign investors have some freedom to determine their own hiring and firing policy as long as it remains within the structure of the labor code, which strongly favors the employee.

Investment incentives are granted on a case-by-case basis, and vary significantly from one investment to the next.

Data Storage

Djibouti does not have any known localized data storage requirements.

6. Protection of Property RightsShare    

Real Property

Djibouti’s legal system officially protects the acquisition and disposition of all property rights. Mortgages do exist, and are often guaranteed by the employer, who signs a form indicating the employee’s status and salary. The employer is then obliged to inform the bank if the employee leaves the company. Local workers rely on this to secure mortgages and expect that their employer will perform this role. There are no specific restrictions on foreign ownership of land. Djibouti is 168 of 189 on the World Bank’s Registering Property ranking. (

Intellectual Property Rights

The Ministry of Communication is responsible for safeguarding intellectual property, but intellectual property rights are rarely enforced. Trade involving counterfeit products occurs mostly in the informal market. There does not appear to be a higher risk of labor rights violations in sale of counterfeit goods, including child labor, forced labor, and dangerous working conditions compared to other industries.

Djibouti ratified the World Intellectual Property Organization (WIPO) Convention, the Paris Convention on the Protection of Industrial Rights, and the Bern Convention on the Protection of Literature and Art Works.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at

Resources for Rights Holders

For a list of local lawyers, see:

7. Transparency of the Regulatory SystemShare    

Djiboutian laws and regulations are available online. The regulatory regime is written in a way that promotes open competition, at least in the sectors that are open to private investment. Implementation of the law is sometimes not transparent, and public functions such as licensing and issuing permits are not always done in a systematic fashion. Application of the rules is not always consistent. Draft bills are initiated in a process of public consultation where the stakeholders participate.

Accounting, legal, and regulatory procedures are not transparent and are not consistent with international norms. The Djiboutian accounting system is loosely based on the French accounting system as it existed at independence (1977) and has been updated since that time. Legal and regulatory procedures are complex and unevenly enforced.

8. Efficient Capital Markets and Portfolio InvestmentShare    

Two large banks, Bank of Africa (BOA) and Bank for Commerce and Industry – Mer Rouge (BCI-MR), dominate Djibouti’s banking sector. While these two banks account for the majority share of deposits in-country, there were eight other banks, all established in the last ten years. Two of the new banks closed in the last year—WARKA Bank from Iraq and Shura Bank from Egypt. In March 2014, the Central Bank issued a license to a new bank, Djibouti Commercial Bank, whose shareholders are based in Dubai. Credit is allocated on market terms, and foreign companies do not face discrimination in obtaining it. Generally, however, only well-established businesses obtain bank credit, as the cost of credit is high.

Credit is available to the private sector, whether foreign or domestic. Where credit is not available, it is primarily due to the associated risk and not structural factors. In 2014, the percentage of the population with access to banking services was 14 percent, and deposits in banks totaled DJF 207.5 billion (USD 1.17 billion).

Portfolio investment in Djibouti is done through private equity. Some multinational companies with investments in Djibouti are publicly traded. Investments in Djibouti are inherently illiquid for that reason, and the purchase or sale of any sizeable investment in Djibouti affects the market accordingly.

Money and Banking System, Hostile Takeovers

In 2006, Djibouti had two banking institutions; by 2015 it had a total of ten. In 2011 a new banking law went into effect, fixing the minimum capital requirement for financial institutions at DJF 1 billion (USD 5,651,250) and extended the scope of the law to include financial auxiliaries, such as money transfer agencies and Islamic financial institutions.

9. Competition from State-Owned Enterprises (SOEs)Share    

SOEs control telecommunications, water, and electrical distribution in Djibouti. Major print, television, and radio outlets are also state-run. Other state-run services, such as municipal garbage collection and real estate, do not hold legal monopolies but are afforded material advantages by the government (e.g., government-backed loan guarantees for the real estate sector).

SOEs are required by law to publish an annual report. The Court of Auditors is charged with auditing state-owned enterprises.

Djibouti is not party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO.)

OECD Guidelines on Corporate Governance of SOEs

In order to exercise ownership in SOEs, the government uses several laws and decrees, most of which were promulgated in the 1990s. The established practices are not consistent with OECD guidelines. No centralized ownership entity exists.

SOE senior management reports directly to the relevant line ministry. There is also an independent board of directors whose members are chosen from other ministries. Ownership structures and board composition of the SOEs is politically motivated.

Sovereign Wealth Funds


10. Responsible Business ConductShare    

There is nascent but growing awareness among both companies and consumers in Djibouti of Responsible Business Conduct (RBC). The government has not been very involved in promoting RBC in a systematic way, although it does acknowledge good corporate social responsibility and covers it favorably in state media. However, the government does not factor RBC policies or practices into its procurement decisions. Likewise, the government does not effectively and fairly enforce domestic laws relating to labor rights, environmental protections, consumer protections, and human rights. The government does not adhere to OECD guidelines in RBC matters.

11. Political ViolenceShare    

Djibouti has seen only very limited episodes of political violence over the last two decades. Both the ruling coalition party and the recognized opposition parties favor foreign direct investment into Djibouti and recent polling indicates that local attitudes towards foreigners are positive. In the last ten years, there have been no known incidents of political violence leading to damage to foreign investments.

12. CorruptionShare    

U.S. firms have not specifically noted corruption as an obstacle to direct investment in Djibouti, but there were allegations of foreign companies having to meet requirements such as renting houses of high dignitaries or hiring certain employees as a condition of receiving government procurement contracts. Djibouti is a signatory country of the UN Convention against Corruption and has laws and regulations prohibiting corrupt practices. Nonetheless, prosecution and punishment for corruption is rare.

There are two government entities responsible for investigating corruption and enforcing the regulations. The State General Inspection (SGI) is tasked with ensuring human and material resources in the public sector are properly utilized. The Court of Auditors is mandated to verify and audit all public establishments for transparency and accountability, and to implement necessary legal sanctions. Both institutions are mandated to produce annual corruption reports. Despite the legal mandates, both institutions lack the authority to push for meaningful reform.

There are no NGOs involved in investigating corruption in Djibouti. Djibouti does not have laws to counter conflict-of-interest in awarding contracts.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Djibouti ratified the UN Anticorruption Convention in April, 2005.

Resources to Report Corruption

Djibouti is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

13. Bilateral Investment AgreementsShare    

Djibouti does not have a bilateral investment treaty (BIT) with the United States. The U.S and the Common Market for Eastern and Southern Africa (COMESA), which Djibouti is a member of, signed a Trade and Investment Framework Agreement (TIFA) in 2001.

Djibouti has signed bilateral investment treaties with several other countries. There is no publicly available list of these treaties, and the terms are not standardized from one treaty to the next.

Other treaties to which Djibouti is a party include:

ESA (Eastern and South Eastern Africa)-EU Interim Economic Partnership Agreement, COMESA, Agreement for the Promotion, Protection and Guarantee of Investment among Member States of the Organization of Islamic Conference, The Cotonou Agreement, AU Treaty, League of Arab States Investment, Arab League Investment Agreement, Arab Economic Unity Agreement

Bilateral Taxation Treaties

Djibouti does not currently have a bilateral taxation treaty with the United States

14. OPIC and Other Investment Insurance ProgramsShare    

Djibouti is eligible for Overseas Private Investment Corporation (OPIC) programs. Djibouti is a member of the Multilateral Investment Guarantee Agency (MIGA), which guaranteed the loan for the construction of the Doraleh Container Terminal in 2009.

15. LaborShare    

Djibouti has complicated labor laws that favor the employee, especially in the areas of disputes and termination.

Vocational and professional training facilities remain limited. Skilled Djiboutian workers, especially in high-demand trades such as construction, are in short supply. Unskilled labor is widely available. In December 2013, the cost for a work permit increased from 20,000 Djibouti francs (USD 112) to 200,000 Djibouti francs (USD 1,124). The National Agency for Employment, Training, and Professional Integration (ANEFIP) maintains a database of Djiboutian job-seekers and issues work permits to foreign workers. The government policy gives priority to hiring Djiboutian nationals when they are qualified.

The Government of Djibouti, Port of Djibouti, and Camp Lemonnier are the country’s top employers. There are limited private sector employment opportunities. Minimum wage is USD 250 per month. By law, all employers are obligated to make social security payments on behalf of their employees, through the National Council for Social Security. Two large labor unions exist in Djibouti, but only the Djiboutian Workers Union (UDT) is recognized by international organizations.

Widespread use of the legal narcotic khat substantially affects both employee performance and family incomes. Reports show that over half of the Djiboutian male population consumes khat. Khat chewing begins around noon and lasts well into the afternoon. Work productivity during that time period is significantly decreased.

Workers who are laid off get more compensation than employees who are fired. No unemployment insurance or other social safety net programs exist for workers laid off for economic reasons. Only those workers who contributed to the social insurance for 25 years and are sixty years of age are entitled to retirement benefits.

The Free Zone has separate labor law provisions. By law, labor unions are independent of the government and employers. In practice they can be influenced by the government and/or employers.

16. Foreign Trade Zones/Free Ports/Trade FacilitationShare    

The Djibouti Free Zone (DFZ) is located on 40 hectares and offers office space, warehouses, light industrial units, and hangars. Businesses located in the Free Zone do not pay corporate taxes, have a simplified registration process, and receive other benefits such as assistance obtaining work permits and visas. Currently, 160 companies from 39 countries operate out of the Free Zone. In December 2013, the DAM Commercial Free Zone opened in the Damerjog region, south of Djibouti City. There are plans to build additional free zones in the coming years, centered around the Doraleh area where the port terminals are.

17. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy


Host Country Statistical source

USG or international statistical source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data






Host Country Gross Domestic Product (GDP) ($M USD)






Foreign Direct Investment

Host Country Statistical source

USG or international statistical source

USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)





Host country’s FDI in the United States ($M USD, stock positions)





Total inbound stock of FDI as % host GDP






Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.

18. Contact for More InformationShare    

Tyler Joyner
Economic and Commercial Officer
U.S. Embassy Djibouti
+253 21453259